The Labor Department reported Friday that job growth in April was better than expected despite bank turmoil and a declining economy.
Nonfarm payrolls increased by 253,000 for the month, beating Wall Street’s estimate of an increase of 180,000. According to the Bureau of Labor Statistics,
The unemployment rate was 3.4%, against estimates of 3.6%, and was tied at the lowest level since 1969. A more comprehensive number that included discouraged workers and those holding part-time jobs for economic reasons declined to 6.6%.
Average hourly earnings, a key inflation barometer, rose 0.5% for the month, beating estimates by 0.3% and the biggest monthly gain in a year. On an annual basis, wages increased 4.4%, which exceeded expectations for a 4.2% gain. Both numbers raise the possibility that the Federal Reserve could decide to raise interest rates again in June, although markets were pricing in only a small possibility after the jobs report.
Wall Street opened higher After the news of jobs, with Dow Jones Industrial Average With gains of nearly 400 points, while Treasury yields also jumped. The move higher followed a strong earnings report from Apple and a powerful rebound in banking stocks.
“It is encouraging to see a strong jobs report amid recession concerns, banking sector volatility and ongoing layoffs,” said Steve Rick, chief economist at CUNA Mutual Group. “We expect continued strength in the jobs market and signs of slowing inflation will moderate market volatility in the months ahead.”
Professional and business services led the job growth with an increase of 43,000. This was followed by health care (40,000), leisure and hospitality (31,000), and social assistance (25,000).
Jobs in finance increased by 23,000, despite serious problems in the banking industry. Government recruitment increased by 23,000.
April’s upside surprise was offset by sharp downward revisions in the previous months. March’s count dropped 71,000 from the initial estimate to 165,000, while February fell to 248,000, a decrease of 78,000. In addition, the household survey used to calculate the unemployment rate showed a total job loss of 139,000.
“The best thing you can say from today’s report is that job growth is slowing relative to the average seen over the past few months,” said Matt Perrone, director of research at Janus Henderson Investors. “However, wages were very high and this is an important aspect of the report for the Fed and markets. Our concern is that policy rates will remain high which could put pressure on earnings and equity multiples.”
The unemployment rate remained at a record low until May 1969. The unemployment level fell to a new record 4.7% for blacks and 4.4% for Hispanics while remaining at 2.8% for Asians. The rate for adult women was unchanged at 3.1%.
The labor force participation rate was unchanged at 62.6% while the labor force decreased to 166.7 million.
Workers load packages into Amazon Rivian electric trucks at an Amazon facility on November 16, 2022 in Poway, California.
Sandy Huffaker | reuters
Friday’s report comes amid continuing troubles in the banking industry, especially mid-sized regional institutions that have been running on deposits and worried investors that have driven share prices down.
The economy also appears to be slowing toward a possible recession later in the year. GDP grew only 1.1% in the first quarter, largely on an inventory drawdown, although there have been signs that consumer spending is weakening. For example, according to Bank of America, credit card spending has decreased by 0.7% compared to a year ago.
Despite bank troubles and recession fears, the Federal Reserve raised its benchmark interest rate this week by another quarter percentage point, taking it to its highest level since August 2007.
Fed Chairman Jerome Powell acknowledged that higher interest rates were putting pressure on households, though he said the labor market remained strong. He said the economy “could face more headwinds from tighter debt conditions.”
The central bank has been trying to bring down inflation to the 2% annual level, although it is now well above this. One measure, the Consumer Price Index, shows inflation running at a 5% annual pace.
Rising wages have helped pressure prices. Powell said a 3% annual wage gain is probably more in line with the Fed’s 2% mandate.