April employment report reveals stark hiring pullback from prior month

Will moderation in hiring, wage growth bring Fed closer to rate-lowering cycle?

Nonfarm employers added 175,000 jobs in April, far below economist expectations and signaling that moderation of the labor market is accelerating.

April’s additions vastly undershot the 315,000 jobs gained during the previous month and the 269,000-job average increase of the prior three months, as well as the average monthly pick-up of 242,000 jobs over the past year. It also fell short of the 243,000 additions forecast by a panel of economists surveyed by Reuters.

Employment in health care and social assistance was strong, with the two sectors combining for 87,000 job additions — nearly half of the total April gain. But several key employment sectors saw little change, including manufacturing; information; finance; professional and business services; and leisure and hospitality.

Weak growth in high-paying white-collar sectors like information and finance held down April’s average hourly earnings, which grew just 0.2% month over month, also missing expectations. Year over year, wages rose 3.9%, the smallest annual climb since May 2021.

The unemployment rate, meanwhile, rose one-tenth of a percentage point to 3.9%, keeping it within the range of 3.7% to 3.9% where it has hovered since August last year.

On a big-picture basis, the job market remains healthy; consider, for example, that pre-pandemic in 2019, the average monthly gain was 166 jobs. The stark one-month drop does raise questions of whether employment momentum is on the wane, though a gradual easing of labor gains does offer hope that rate cuts from the Federal Reserve could soon be on the table. So does the cooling of wage increases — though a slower pace of paycheck growth for American workers could dent consumer spending, which has been propping up the economy at large.

“The April jobs report is a softer, dovish jobs report,” said Odeta Kushi, deputy chief economist at First American Financial Corp. “The labor market remains in good shape, and this report is not indicative of a recessionary labor market, but it is indicative of a slowing labor market. If inflation data also comes in softer, then the Fed may have more reason to cut rates later this year.”

Kushi also noted that there may be an additional silver lining to the weak April report.

“The soft jobs report may bring some immediate mortgage rate relief to the spring home-buying season – the 10-year Treasury yield dived below 4.5% in response to the jobs report, which will put some downward pressure on mortgage rates.”


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