Live Updates: U.S. Job Growth Slows

Lydia DePillis

May 3, 2024, 10:42 a.m. ET

May 3, 2024, 10:42 a.m. ET

The American job market may be shifting into a lower gear this spring, a turn that economists have expected for months after a vigorous rebound from the pandemic shock.

Employers added 175,000 positions in April, the Labor Department reported Friday, undershooting forecasts. The unemployment rate ticked up to 3.9 percent.

A less torrid expansion after the 242,000-job average over the prior 12 months isn’t necessarily bad news, given that layoffs have remained low and most sectors appear stable.

“It’s not a bad economy; it’s still a healthy economy,” said Perc Pineda, chief economist at the Plastics Industry Association. “I think it’s part of the cycle. We cannot continue robust growth indefinitely considering the limits of our economy.”

The labor market has defied projections of a considerable slowdown for over a year in the face of a rapid escalation in borrowing costs, a minor banking crisis and two major wars. But economic growth declined markedly in the first quarter, suggesting that the exuberance that characterized the last two years might be settling into a more sustainable rhythm.

Wage growth moderated sharply in April, sinking to 3.9 percent from a year earlier. Swift wage growth in the first quarter, evidenced by a hotter-than-expected Employment Cost Index reading, may have in part reflected raises and minimum-wage increases going into effect in January as well as new union contracts.

The average number of hours worked per week sank, another signal of a decline in labor demand.

The numbers may be welcome news for the Federal Reserve, which has been holding interest rates steady as inflation has remained stubborn. Although the Fed chair, Jerome H. Powell, said this week that he wasn’t targeting lower wage growth, he added that sustained hot pay gains could prevent inflation from being tamed.

Bond yields fell on the new data, indicating a belief that the Fed may cut rates this year after some doubt that it would do so, and the S&P 500 was up sharply in the first minutes of trading.

The payroll number is in line with other indicators of slackening conditions that have mounted in recent months: Job openings have fallen substantially from their peak two years ago, and workers are quitting their jobs at lower rates than they were before the pandemic.

“We’ve seen a significant easing in labor demand, and it’s not a surprise that hiring is also slowing down in this economic environment where interest rates are still elevated,” said Lydia Boussour, a senior economist at the consulting firm EY-Parthenon. “We are also seeing cost fatigue from consumers and businesses, which is putting downward pressure on private sector activity.”

Employment growth has been narrowing to a few industries, and that trend continued in April, with health care accounting for a third of the growth.

Leisure and hospitality employment was essentially flat, arresting what had been fairly swift growth as the industry approaches its prepandemic staffing levels.

Lulls in interest-rate-sensitive sectors like technology and manufacturing have been offset by unabated growth in industries like health care, which is powered by aging demographics, and state and local government, which has been catching up after losing workers to better offers during the pandemic.

Federal funding has supported construction work on large infrastructure projects and private investment in clean energy development, as well as subsidies for industries like child care that continue to filter through the economy.

“Depending on where you land, it’s a question of how many of us can end up working for the government in some form or fashion,” said Belinda Román, an associate professor of economics at St. Mary’s University in San Antonio.

As wages have risen — outpacing inflation on average for nearly a year — more people have started looking for jobs, allowing employers to fill positions more quickly. The increased flow of both legal and undocumented immigrants added about 80,000 workers to the labor supply each month last year, according to calculations by Goldman Sachs, and will add another 50,000 per month this year.

And beyond public spending, much of the enduring strength stems from purchases by households, which have been burning through bank balances built during the pandemic. As savings rates decline and delinquency rates on consumer loans rise, that rocket fuel is likely to run dry, leaving an economy that’s still fundamentally sound.

“We are still forecasting what we’d call a modest slowdown, but we’ve got the picture improving again,” said Stephen Brown, deputy chief North America economist for Capital Economics. “For the average worker, it’s not going to feel like a slowdown.”

Gregory Schmidt

May 3, 2024, 10:22 a.m. ET

May 3, 2024, 10:22 a.m. ET

The cooling job market could bring relief to a tight housing market, where the average rate for a 30-year mortgage hit 7.22 percent this week. “An economy that is too hot is not good for interest rates,” said Lawrence Yun, chief economist at the National Association of Realtors. “Hence, the latest news of some cooling in the labor market could mean the topping-out of mortgage rates this week before more sustained declines through the remainder of this year.”

Lydia DePillis

May 3, 2024, 9:48 a.m. ET

May 3, 2024, 9:48 a.m. ET

Notable that while overall labor force participation was steady, women between the ages of 25 and 54 — considered prime working years — reached their highest participation rate ever, at 78 percent.

Lydia DePillis

May 3, 2024, 9:49 a.m. ET

May 3, 2024, 9:49 a.m. ET

Men in the same age bracket fell back to 89.1 percent, slightly off their prepandemic participation rate.

Kevin McKenna

May 3, 2024, 9:39 a.m. ET

May 3, 2024, 9:39 a.m. ET

On Truth Social, Donald J. Trump, the presumptive Republican presidential nominee, declared the report showed “HORRIBLE JOB NUMBERS.” Under Mr. Trump’s presidency, before the pandemic’s impact took hold in March 2020, monthly job gains averaged about 180,000 — just a tad higher than April’s gain.

J. Edward Moreno

May 3, 2024, 9:38 a.m. ET

May 3, 2024, 9:38 a.m. ET

Wall Street is continuing to celebrate the prospect of lower borrowing costs as the market opened on Friday. The S&P 500 opened more than 1 percent higher and the tech-heavy Nasdaq composite is up almost 2 percent.

Jeanna Smialek

May 3, 2024, 9:33 a.m. ET

May 3, 2024, 9:33 a.m. ET

+2

+4

+6

+8%

2019

2020

2021

2022

2023

2024

+3.9%

in April

+3.5%

in March

Consumer Price Index

Avg. hourly earnings

Federal Reserve officials have been looking for further evidence that their interest rate increases over the past two years are weighing on the economy and job market, and Friday’s employment report roundly provided that signal.

Average hourly earnings, a measure of wage growth, climbed 3.9 percent in April from a year earlier. That was both cooler than the previous reading and slightly cooler than the 4 percent economists had forecast.

That moderation came as job gains slowed, the unemployment rate ticked up slightly and average weekly hours nudged down. The overall picture was one of a labor market that remains solid but is gradually slowing — exactly what officials at the Fed have been looking for.

Central bankers generally embrace a strong job market: One of their two mandates from Congress is to foster maximum employment. But when inflation is rapid, like it has been since 2021, officials worry that a hot labor market could help to keep price gains elevated. If employers are competing for workers and paying more, they are likely to also try to charge more, the theory goes. And workers who are earning slightly bigger paychecks may have the wherewithal to pay more without pulling back.

Given that, Fed officials have been keeping an eye on the job market as they contemplate their next steps on interest rates. At the Fed’s policy meeting this week, officials kept interest rates at 5.3 percent, the highest level in more than two decades. The central bank started 2024 expecting to cut rates several times, but those plans have been delayed by surprisingly stubborn inflation.

While inflation is the main thing determining when and how much borrowing costs can come down, Jerome H. Powell, the chair of the Federal Reserve, made it clear this week that central bankers are also watching what happens with hiring and pay.

Mr. Powell emphasized repeatedly this week that the Fed did not specifically target wage growth when setting policy, but he also suggested that pay gains might need to slow further for inflation to come down sufficiently and in a lasting way — which means that Friday’s numbers could be a welcome development.

“We don’t target wages; we target price inflation,” he said. When it comes to cooling the economy, he said, “part of that will probably be having wage increases move down incrementally toward levels that are more sustainable.”

Stock indexes picked up after the report, as investors welcomed the more moderate data as a sign that interest rates may not stay high for as long. Investors in assets like stocks tend to prefer low rates.

Mr. Powell laid out several possibilities for what could come next with rates, and the job market is a factor in some scenarios.

A combination of persistent inflation and continuing strength in the labor market could prompt the Fed to leave rates unchanged for longer, he said. But if inflation begins to cool again, that would pave the way for rate cuts, Mr. Powell said. So, too, could evidence that the job market is cooling unexpectedly.

Friday’s small tick up in unemployment was probably not enough to meet that standard. Mr. Powell suggested this week that it would take more than a small jump in unemployment for the Fed to feel that the job market was struggling enough to merit lower rates.

“It would have to be meaningful and get our attention and lead us to think that the labor market was really significantly weakening for us to want to react to it,” he said, adding that an increase of a couple of tenths of a percentage point in the unemployment rate would probably not meet that standard. “It would be a broader thing,” he said.

Jim Tankersley

May 3, 2024, 9:29 a.m. ET

May 3, 2024, 9:29 a.m. ET

President Biden is out with a statement celebrating the report, in fairly generic terms. “With today’s report of 175,000 new jobs, the great American comeback continues,” he said.

Joe Rennison

May 3, 2024, 9:10 a.m. ET

May 3, 2024, 9:10 a.m. ET

“This is the jobs report the Fed would have scripted,” said Seema Shah, chief global strategist at Principal Asset Management. However, investors have a way of quickly moving on. “Today’s weaker numbers need to mark the start of a new slower trend for multiple rate cuts to seriously be back on the agenda, but by then the new fear could be a slowing economy,” she added.

Ben Casselman

May 3, 2024, 9:09 a.m. ET

May 3, 2024, 9:09 a.m. ET

There’s been some attention in recent months on the growth of part-time employment, so it’s notable that the gains in April were entirely full time — part-time employment actually declined. There was, however, an increase in the number of people working part-time involuntarily, meaning they would have preferred full-time work.

Ben Casselman

May 3, 2024, 8:57 a.m. ET

May 3, 2024, 8:57 a.m. ET

The decline in the Black unemployment rate that Tal flagged earlier is very encouraging. Black workers have historically been among the first to lose their jobs in an economic downturn — as the late economist William Spriggs often said, they are the “canary in the coal mine” for the broader economy — so the rise in recent months had been a concerning sign.

J. Edward Moreno

May 3, 2024, 8:55 a.m. ET

May 3, 2024, 8:55 a.m. ET

Expectations that interest rates will come down tends to weigh on a currency as investors look for more lucrative places to park their money.

J. Edward Moreno

May 3, 2024, 8:53 a.m. ET

May 3, 2024, 8:53 a.m. ET

The dollar index, a gauge that measures its strength against a basket of currencies, dropped about .70 percent on the news of weaker-than-expected jobs numbers. It’s on course for its biggest one-day drop of the year.

Joe Rennison

May 3, 2024, 8:42 a.m. ET

May 3, 2024, 8:42 a.m. ET

This week began with fears of stubborn inflation and higher interest rates weighing on the stock market. It now looks set to end with Powell reassuring investors that rates are unlikely to move higher, and with a slowing labor market brings back hopes of rates moving lower this year.

Ben Casselman

May 3, 2024, 8:39 a.m. ET

May 3, 2024, 8:39 a.m. ET

Despite the slowdown in hiring, job growth was pretty broad-based in April. Health care, retail, transportation and warehousing all added a significant number of jobs, and blue-collar sectors like manufacturing and construction also grew.

Education and health

+95,000 jobs

Retail

+20,100

Construction

+9,000

Manufacturing

+8,000

Government

+8,000

Leisure and hospitality

+5,000

Business services

–4,000

Ben Casselman

May 3, 2024, 8:39 a.m. ET

May 3, 2024, 8:39 a.m. ET

One surprise: The leisure and hospitality sector, which has helped lead the way on job growth in recent months, added only 5,000 jobs in April.

J. Edward Moreno

May 3, 2024, 8:38 a.m. ET

May 3, 2024, 8:38 a.m. ET

The interest rate sensitive two-year treasury yield is down 0.1 percentage points, marking the biggest one-day decline of the year, a sign investors see lower interest rates on the horizon.

Joe Rennison

May 3, 2024, 8:45 a.m. ET

May 3, 2024, 8:45 a.m. ET

Investors are now back to betting on two quarter-point cuts to interest rates this year, based on prices in futures markets. At the start of the week, they were betting on just one.

Talmon Joseph Smith

May 3, 2024, 8:38 a.m. ET

May 3, 2024, 8:38 a.m. ET

The unemployment rate ticked up ever so slightly in April, to 3.9 percent. But the Black unemployment rate, which recently jumped up to 6.4 percent, worrying some labor economists, shifted back downward to 5.6 percent.

Jeanna Smialek

May 3, 2024, 8:37 a.m. ET

May 3, 2024, 8:37 a.m. ET

Together with a slower increase in payrolls and a tick up in the unemployment rate, the wage cooldown in this report is likely to reinforce to the Fed that the job market is cooling. But it’s not so slow that it would be a reason to worry that things are falling apart, especially since March payroll gains were revised up.

Jim Tankersley

May 3, 2024, 8:36 a.m. ET

May 3, 2024, 8:36 a.m. ET

On first blush, this report shows exactly the sort of slowing Biden was talking about two years ago — a drop in the pace of job creation but not a huge one, without any corresponding jump in the unemployment rate. It looks like a good report for the president.

Jim Tankersley

May 3, 2024, 8:37 a.m. ET

May 3, 2024, 8:37 a.m. ET

To be sure, Republicans are almost certain to attack Biden for the slowdown in monthly job creation, as they have in the past when month-to-month numbers have dipped.

Jeanna Smialek

May 3, 2024, 8:36 a.m. ET

May 3, 2024, 8:36 a.m. ET

Average hourly earnings, which the Federal Reserve keeps a close eye on, climbed 3.9 percent in April from a year earlier. That was both cooler than the previous reading and slightly cooler than the 4 percent economists had forecast.

J. Edward Moreno

May 3, 2024, 8:35 a.m. ET

May 3, 2024, 8:35 a.m. ET

Investors are welcoming signs of a cooling labor market, sending S&P 500 futures rising.

Joe Rennison

May 3, 2024, 8:37 a.m. ET

May 3, 2024, 8:37 a.m. ET

The index shot higher after the numbers were released and is now more than 1 percent higher for the day.

Joe Rennison

May 3, 2024, 8:18 a.m. ET

May 3, 2024, 8:18 a.m. ET

Investors reacted positively on Wednesday to Powell’s message that rates are “unlikely” to go any higher, despite stubborn inflation. And that should insulate markets against the possibility that the jobs report signal today that the economy is still running hot.

Joe Rennison

May 3, 2024, 8:18 a.m. ET

May 3, 2024, 8:18 a.m. ET

Futures on the S&P 500, which allow investors to bet on the market before the official start of trading, nudged higher ahead of the fresh jobs numbers being released.

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