Nonfarm employers added 253,000 jobs in April in a surprising reversal of the cooling trend seen so far in 2023, offering a snapshot of labor strength even as banking stress and continued interest rate hikes have thrust the U.S. economy at large into uncertain waters.
The newest numbers provided by the U.S. Bureau of Labor Statistics revealed sharp downward revisions for February and March data, with 149,000 fewer jobs added in the two months than previously reported. But April’s job growth was by far the most eye-catching figure in the jobs report, exceeding estimates from economists polled by Reuters by 73,000. To be sure, hiring momentum still appears to be slowing, but the slowdown is a gradual one.
Professional and business services saw the largest increase among all sectors, adding 43,000 jobs. Health care (40,000 added jobs in April), along with leisure and hospitality (31,000) also saw strong gains. Notably, even with the banking sector roiled by turmoil, finance jobs grew by 23,000 in April. And construction companies added 15,000 jobs, offsetting a small decrease in March and flashing resilience even in the higher mortgage rate environment.
“While the housing industry, a very interest-rate-sensitive sector, has been negatively impacted by the Federal Reserve’s monetary tightening, the construction labor market has not experienced a sharp decline,” said Odeta Kushi, deputy chief economist at First American Financial Corp. “In the April jobs report, residential building construction employment is up 1.3% year over year, while nonresidential is up by 3.4%. Residential building is up 11% compared with pre-pandemic levels, while non-residential building is up approximately 0.5%. Both declined modestly on a month-over-month basis.
“Despite declines in the number of single-family homes under construction, residential construction labor demand remains strong,” she added. “Building a home does not readily lend itself to outsourcing and automation. Homebuilding still requires manual labor as a key input into the production process.”
Robust hiring helped push the national unemployment rate back down to 3.4%, matching a 53-year low. The labor-force participation rate, after four consecutive months of gains, was unchanged at 62.6%, although it’s likely to resume an upward trajectory given the economic environment of high inflation and declining consumer savings.
Average hourly earnings rose 0.5%, up from 0.3% growth in March for the largest month-over-month gain in a year. On an annualized basis, wages were up a solid 4.4%. Both figures are still off from the level needed to reach the Federal Reserve’s targeted 2% inflation rate, elevating the chances that the central bank — which was recently noncommittal on whether or not its most recent interest rate increase would be the last of the cycle — could opt for another rate hike after its June meeting.
Kushi said that the jobs report offered signs that “a ‘soft landing’ is still on the table.”
“The Fed’s hope is to architect a soft landing, such that tighter monetary policy will reduce job openings without big increases in unemployment,” she said. “If you’re looking for signs of a recession in the labor market data, you won’t find it in this report.”