US Job Growth Slows in April Amid Cooling Labor Market

The US economy added 175,000 jobs in April, falling short of expectations and marking a slowdown from recent months. The unemployment rate edged up to 3.9%, while wage growth moderated and the average workweek declined.

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Trim Correspondents
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US Job Growth Slows in April Amid Cooling Labor Market

US Job Growth Slows in April Amid Cooling Labor Market

The US economy added 175,000 jobs in April, falling short of analysts' expectations and marking a significant slowdown from the robust us, report growth seen in recent months. The unemployment rate edged up to 3.9%, though it remains near historic lows.

Why this matters: The slowdown in job growth has significant implications for the overall health of the US economy, as it may signal a shift towards a more sustainable pace ofreport, us, growth. This, in turn, could impact the Federal Reserve's decision on interest rates and have a ripple effect on the broader economic landscape.

The April job gains represent a notable deceleration from the average of 276,000 new jobs per month created in the first quarter of 2024 and the 242,000 average over the prior 12 months. Wage growth also moderated sharply, sinking to 3.9% from a year earlier, while the average workweek declined, signaling a pullback in labor demand.

Despite the cooling, the labor market continues to be a pillar of strength for the broader US report, economy. Over 60% of private-sector industries added jobs last month, with the healthcare sector accounting for a third of the total growth. However, industries such as technology, manufacturing, and leisure and hospitality experienced hiring lulls in April.

Perc Pineda, chief economist at the Plastics Industry Association, put the slowdown in perspective, saying, "It's not a bad economy, it's still a healthy economy. I think it's part of the cycle. We cannot continue robust growth indefinitely, considering the limits of our economy."

The moderation in job growth comes with the Federal Reserve having aggressively raised interest rates over the past year to combat stubbornly high inflation. In recent remarks, Fed Chair Jerome Powell acknowledged the strength of the labor market but stressed that inflation remains too high and further progress is needed to reach the central bank's 2%target.

Powell said on April 16, "Given the strength of the labor market and progress on inflation so far, it's appropriate to allow restrictive policy further time to work and let the data and the evolving outlook guide us," downplaying the likelihood of additional rate hikes in the near term.

Bond yields fell following the release of the weaker-than-expected jobs report, as investors bet that the Fed may pivot to cutting rates later this year. The S&P 500 also surged in morning trading, buoyed by the prospect of a less hawkish monetary policy index.

Economists anticipate that the cooling job market will help ease pressure on the tight housing market, where mortgage rates have surged in recent months. They also expect GDP and job growth to moderate to a steadier, more sustainable pace following the pandemic-induced disruptions of recent years, when the economy normalizes.

The US labor market has demonstrated remarkable resilience over the past year, defying projections of a significant slowdown despite facing headwinds from high interest rates, banking sector turmoil, and geopolitical tensions. The April jobs report suggests that the economy is gradually returning to pre-pandemic norms, with solid job and wage growth supporting a healthy expansion even though the pace of hiring moderates from the torrid levels seen in 2022 and early 2023.

Key Takeaways

  • US economy adds 175,000 jobs in April, below expectations.
  • Unemployment rate rises to 3.9%, still near historic lows.
  • Wage growth slows to 3.9% year-over-year, average workweek declines.
  • Fed may pivot to cutting rates later this year due to slower job growth.
  • Economists expect GDP and job growth to moderate to a sustainable pace.