High prices, rising interest rates and banking uncertainty be damned: The US labor market is still chugging right along.
Employers added 253,000 jobs in April, the Bureau of Labor Statistics reported Friday.
That’s a good chunk more than economists were expecting, making this jobs report the 12th out of the last 13 to come in “hot.”
Here are some takeaways from the report and what it could mean for workers, job seekers, employers, the Federal Reserve and everyone in between:
The labor market is ‘unstoppable’
When the Federal Reserve started its inflation-busting campaign back in March 2022, concerns grew about the potential collateral damage: How many Americans could lose their jobs as a result?
The blunt-force effect of rate hikes — that make borrowing money more costly and in turn reduce demand and prices — was expected to send a chill through the nation’s red-hot labor market, which at the time had a historically low 3.6% unemployment rate.
Fourteen months and 5 percentage points later, the economy added more than a quarter of a million jobs and the unemployment rate dipped down again to a decades-low 3.4%.
“The American labor market right now is simply unstoppable,” RSM economist Joseph Brusuelas wrote in a note Friday. “It’s a little like how sports commentators used to describe defending basketball great Michael Jordan: One can’t stop him, one can only hope to contain him.”
And for job seekers and workers, that’s a great thing:
“You want a job, it’s yours for the asking,” Chris Rupkey, chief economist at FwdBonds, wrote in a note.
Fueling those hopes for a ‘soft landing’
Last month’s job growth may have been stronger than economists expected, but the latest BLS report also noted that the previously reported estimates for February and March were revised downward by a combined 149,000 jobs.
Those revisions bring average job growth down to 222,000 for the past three months. While that’s above the average 183,000 monthly gain seen in the decade before the pandemic, it’s a far cry below what was seen during the economic rebound of the past two years (when monthly job gains averaged 399,000 in 2022 and 606,000 in 2021).
“We are seeing a slowing in the labor market, and that’s good news from an inflation perspective,” Gus Faucher, chief economist with the PNC Financial Services Group, told CNN. “Businesses are still trying to hire, demand for labor is still strong, but it’s not quite as strong as it was even in late 2022. For businesses, it looks like they’re finding that perhaps it’s a little bit easier to find workers now.”
The ongoing resilience of the labor market also helps to bolster hopes that it’s still possible for the Fed to bring down inflation without jettisoning millions of people to the unemployment rolls and triggering a recession.
“This is what a soft landing would look like, with job growth gradually slowing to a more sustainable pace,” Faucher added. “That being said, we won’t know whether we’ve achieved a soft landing probably until the end of this year.”
A milestone for Black unemployment
The Black unemployment rate tumbled to a record low in April for the second month in a row, providing fresh evidence of America’s historic jobs boom.
The Black unemployment rate dropped to 4.7% last month, compared with 5% the prior month. That marks the lowest level on records that go back to 1972 and is a sharp drop from 5.7% as recently as February.
The milestone comes just three years after the Covid-19 pandemic caused mass layoffs that pushed the Black unemployment rate as high as 16.8%.
While on its face this is promising news, the rate decline was accompanied by a drop in Black labor force participation and employment, said Heidi Shierholz, a former Labor Department chief economist who now serves as the president of the Economic Policy Institute.
“Make no mistake, the Black [unemployment] rate is still too high,” Shierholz tweeted. “Due to the impact of structural racism on the labor market, [Black & Hispanic workers] have much higher [unemployment] rates than White [workers]. But the strong jobs recovery has brought [Black and Hispanic unemployment] down far faster than in the past.”
Wage growth picks back up: Good for the consumer and economy but not the Fed
Friday’s jobs report showed that average hourly earnings grew in April by 16 cents, or 0.5%, to $33.36, the biggest month-over-month gain since March 2022, though wage growth had cooled since then.
From a year earlier, wages increased 4.4%, up slightly from the prior month, but down from the 5.9% rise in March of last year.
Strong wage growth complicates the Fed’s mission to bring down price increases because higher labor costs could put upward pressure on inflation.
When wages go up, that’s good news for consumer spending and the economy. But for the Fed, it’s a roadblock, noted Scott Anderson, chief economist at Bank of the West.
“The more stubborn the resilience in job and wage gains, the longer the Fed will need to remain in a restrictive monetary stance, and the bigger the chance of an economic downturn at some point this year,” he wrote.
‘Cracks are emerging’
For the first four months of the year, job growth has averaged 285,000 per month, more people are participating in the labor market, and job gains are occurring in even some of the most challenged sectors such as manufacturing and construction, Wells Fargo economists Sarah House and Michael Pugliese wrote in a note.
But the storm clouds are gathering.
“With each passing month, the tailwinds from efforts to restaff post-lockdowns are getting weaker, while the hiring headwinds from tighter monetary policy are getting stronger,” they wrote. “The jobs market remains on solid ground, but cracks are emerging. Jobless claims are ticking higher, job openings are rapidly declining, and temporary help employment fell once again in April, with the latter being a useful indicator of labor demand growth on the margin.”
Next up: Key lending and inflation data and debt ceiling discussions
Plenty can happen and plenty of data will drop between now and the Fed’s next meeting, in June.
Some important economic reports will be released next week, including the Senior Loan Officer Opinion Survey on Monday, which will provide some insight into lending conditions, and the key inflation gauges of the Consumer Price Index and Producer Price Index.
Separately, President Joe Biden is expected to meet with congressional leaders to hold discussions about raising the debt ceiling.
Not doing so would be “unprecedented,” Fed Chair Jerome Powell said this week, adding that the consequences to the US economy could be highly uncertain and “quite averse.”
— CNN’s Matt Egan and Bryan Mena contributed to this report.
