April's report reveals a slowdown in hiring and wage gains, suggesting subtle shifts in the US labour market
US employers reduced hiring in April, and the unemployment rate unexpectedly increased, indicating a potential cooling in the labour market, according to a report by BNN Bloomberg.
The Bureau of Labor Statistics revealed that nonfarm payrolls grew by 175,000 last month, marking the smallest increase in six months. The unemployment rate edged up to 3.9 percent, and wage gains decelerated.
Despite this slowdown, Jerome Powell, chair of the US Federal Reserve, suggested that the data does not signify a weakening that would prompt a policy response.
Speaking after the central bank's decision to maintain interest rates, Powell mentioned that for inflation goals to be met, wage growth needs to incrementally decrease. This latest report showed wages rising by 0.2 percent from March and 3.9 percent from a year earlier, the slowest since June 2021.
This change partly reflects the impact of a new law in California that introduced a US$20 minimum wage for fast-food workers from April 1.
Following the report, Treasury yields, and the US dollar dropped, while the S&P 500 opened higher, with investor expectations for a September rate cut rising above 50 percent.
Olu Sonola from Fitch Ratings noted that the deceleration in payroll growth and subdued wage increases might be seen as positive signs for those anticipating a rate cut. However, consistent moderation and improved inflation figures will likely be needed before the Fed considers adjusting rates.
Job growth slowed notably in sectors like leisure and hospitality, construction, and government, with declines observed in automotive manufacturing and temporary help services. Conversely, health care, transportation, and retail trade saw employment gains.
The first quarter had shown strong economic indicators, with average payroll additions of 269,000 from January through March, making April's figures a significant slowdown.
President Joe Biden highlighted the enduring strength of the job market as evidence of successful economic policies, pointing to a sustained unemployment rate below four percent for over two years.
A broader measure of employment stability, aggregate weekly payrolls, remained unchanged from the previous month, breaking a three-year streak of monthly increases. This halt could signal potential reductions in consumer demand.
According to Bloomberg Economics, the April figures reflect the influence of monetary policy on the labour market, which might support the Federal Reserve's cautious stance on interest rates.
The report emphasized that despite high rates, there is no rush to reduce them, partly due to an increase in worker supply, including a significant number of immigrants.
The labour force participation rate stayed at 62.7 percent, with the rate for those aged 25-54 reaching 83.5 percent, the highest in two decades. Such increased participation is expected to help moderate wage growth.
The jobs report combines data from two surveys: one from businesses providing payroll and wage information, and a smaller household survey determining the unemployment rate.
Discrepancies between these surveys were noted, especially with the household survey showing only a modest employment increase of 25,000 in April compared to a much larger gain the previous month.
This divergence raises questions about the gap between these figures and the headline payroll numbers.
Further details from the report include a slight decrease in weekly hours worked to 34.3, an increase in the underemployment rate to the highest since November 2021, and a rise in part-time workers for economic reasons, suggesting emerging stresses in the labour market.
