The U.S. economy added 428k jobs in April, coming in well above the consensus forecast of 380k. As of April, total payroll employment remains 0.8% below February 2020 levels. Downward revisions subtracted 39k jobs from the two prior months.
Employment gains were widespread, with leisure and hospitality (78k) seeing the biggest gains on the month – though employment in this sector still remains 8.5% below pre-pandemic levels. Education & health care (59k), transportation & warehousing (52k), retail & wholesale trade (51k), professional & business services (41k), and financial activities (35k) all had strong gains on the month. Hiring in goods producing (66k) industries was largely concentrated in manufacturing (55k). Government (22k) hiring was also strong in April.
The unemployment rate held steady at 3.6%, as both the labor force (-363k) and number of people employed (-353k) fell by roughly the same amount. As a result, the participation rate declined by 0.2 percentage points to 62.2%.
Average hourly earnings rose 0.3% month-on-month (m/m), which was up 5.5% on a year-on-year – though it slowed slightly from the 5.6% y/y recorded in March.
Key Implications
The pace of hiring remained robust in April, exactly matching March’s strong tally. At this point, the biggest factor preventing an even stronger pace of hiring stems from the lack of labor supply. This was perhaps the most disappointing element of April’s employment report, as the pool of available workers unexpectedly declined.
Cutting the labor force data by age offers some insight into the labor supply issues. To date, the 25-34 age cohort has been one of the slowest to recover and still remains 1.8% (560k) below pre-pandemic levels, with losses equally split between males and females. This is likely due to the fact that this age group would include many young parents who are still struggling to find childcare. The other cohort to have lagged considerably is the 55+, as the pandemic has likely knocked many of these workers into an early retirement. Lingering health and safety concerns may also be playing some role in why this cohort has been slower to recover.
While growth in hourly earnings remains strong, the average American is still struggling to see their wage keep pace with inflation. This has led many to seek full-time employment – resulting in the number of those that are part-time for economic reasons to have recently fallen to levels not seen since the early-2000s.
This morning’s report should help assuage some of the recent fears that the economy is slowing. With the labor market still running hot and inflation at multi-decade highs, we expect the Fed to continue to move aggressively on raising rates over the coming months.
