Job growth in April came in better than expected despite banking turmoil and a slowing economy, the Labor Department reported on Friday.
Nonfarm payrolls rose 253,000 this month, beating Wall Street estimates for a 180,000 growth, according to the Bureau of Labor Statistics.
The unemployment rate was 3.4% versus an estimate of 3.6%, the lowest since 1969. A broader figure, which includes discouraged workers and those working part-time for economic reasons, fell slightly to 6.6%.
The average hourly wage, a key inflation barometer, rose 0.5% this month, more than the 0.3% estimate and the biggest monthly gain in a year. On an annual basis, wages increased by 4.4%, beating expectations for a 4.2% increase. Both numbers raise the likelihood that the Federal Reserve could decide another rate hike in June, although markets were pricing in a low probability after the jobs report.
Wall Street opened significantly higher after the jobs news Dow Jones industry average and gained almost 400 points, while government bond yields also jumped. The move higher followed a strong earnings report from Apple and a strong rebound in bank stocks.
“It’s encouraging to see a strong jobs report amid recession concerns, banking sector instability and ongoing layoffs,” said Steve Rick, chief economist at CUNA Mutual Group. “We hope that continued strength in the labor market and signs of slowing inflation will reduce market volatility in the coming months.”
Professional and business services led the job gains with an increase of 43,000. It was followed by health care (40,000), leisure and hospitality (31,000) and social assistance (25,000).
Despite serious problems in the banking sector, jobs in finance rose by 23,000. Government recruitment rose by 23,000.
April’s upside surprise was offset by sharp downgrades over the previous months. March’s figure was cut to 165,000, down 71,000 from the original estimate, while February fell to 248,000, down from 78,000. The household survey, used to calculate the unemployment rate, also showed a lower overall job growth of 139,000.
“The best thing to say from today’s report is that when you look at the average over the last few months, job growth is slowing,” said Matt Peron, research director at Janus Henderson Investors. “However, wages have been stubbornly high and that is a key aspect of the report for the Fed and markets. Our concern is that policy rates will need to remain high, which could put pressure on earnings and equity multiples.”
The unemployment rate had been at a record low since May 1969. The unemployment rate for blacks fell to a new record of 4.7% and for Hispanics to 4.4%, while remaining at 2.8% for Asians. The adult female rate remained unchanged at 3.1%.
The labor force participation rate remained unchanged at 62.6%, while the labor force decreased slightly to 166.7 million.
Workers load packages into Amazon Rivian Electric trucks at an Amazon facility in Poway, California on November 16, 2022.
Sandy Huffaker | Reuters
Friday’s report comes amid ongoing troubles in the banking industry, particularly with mid-sized regional institutions hit by a rush for deposits and worried investors who saw stock prices plummet.
The economy also appears to be slowing for a possible recession as the year progresses. Gross domestic product rose just 1.1% in the first quarter, largely on the back of a destocking, although there are signs consumer spending is slowing. For example, according to Bank of America, credit card spend is down 0.7% year over year.
Despite banking problems and recession fears, the Federal Reserve raised interest rates by another quarter of a point this week, taking them to their highest level since August 2007.
Fed Chair Jerome Powell acknowledged that higher interest rates were putting pressure on budgets, although he noted that the job market had remained strong. He added that the economy “is likely to face further headwinds from tighter credit conditions.”
The central bank is aiming to keep inflation down to an annual level of 2%, although it is now well above that. One measure, the consumer price index, shows an annual inflation rate of 5%.
Rising wages have helped push prices down. Powell said a 3% annual wage increase is likely consistent with the Fed’s 2% mandate.