In April’s jobs report, there was an increase in wages and the unemployment rate reached a historic low, indicating that the job market is very tight.
The labor market continued to show strength in April, with wages increasing and unemployment declining, suggesting the Federal Reserve may need to increase interest rates further to tame inflation.
According to the Labor Department, employers added 253,000 jobs in April from the previous month’s revised increase of 236,000 jobs after economists predicted a slowdown in jobs added. The unemployment rate fell to 3.4% and has changed little from the prior month. The Black unemployment rate also fell three-tenths from 5.0% to 4.7%, lessening the gap between White and Black workers.
Wage growth accelerated over the month, which economists did not expect. In addition, industries that saw an increase in jobs were professional and business services, health care, leisure and hospitality. Jobs sectors such as retail trade, warehousing, and wholesale trade saw little to no change. Industries expected to be affected by higher interest rates like construction and manufacturing recovered from the pullback in March.
The labor market remains robust, unemployment is low, and wages continue to increase for employees. This suggests that the Fed may raise interest rates in their next meeting after they recently increased rates for the 10th consecutive time. The latest bank crises spooked investors and consumers but have shown no effect on the recent jobs report.
The stronger than expected jobs report shows a recession is not imminent. But if the Federal Reserve does continue to increase interest rates, a recession with layoffs and rise in unemployment may not be avoidable.
“We do have a recession probability estimate, over the next 12 months to 75%,”said Joe Brusuelas, chief economist, RMS.
He said the recession will happen over the next 12 months due to a lag impact of Federal Reserve rate hikes. He says we are just beginning to feel the impact of high interest rates now.
An indication that recession may be beginning is that the jobs opening and labor turnover data reported that job openings have declined and layoffs have increased which may affect everyone especially minorities because in a recession Black and Latino are first one fired.
“It is very likely that Blacks and Hispanics are going to be more affected in terms of unemployment rate, and also in terms of the time that takes individuals that have become unemployed to find another job,” said Alfonso Flores-Lagunes, an economic professor at Syracuse University.
The report also shows that Labor force participation, at 62.6 percent rate, remained unchanged in the month of April. The report shows people are still looking for work, but there is “scarcity of labor in the US economy that is impacting business,”said Kenneth Kim, an senior economist at KPMG.
“In order for businesses to continue to grow revenue, they are still competing for labor, in order to hire a workforce to help their businesses grow,” said Kim.
Shirley Wilson, a daycare owner of Twinkling Little Stars And Night Care, located in Philadelphia– is having a hard time filling in jobs opening at her daycare she has owned for 14 years.
“I’ve never seen nothing like it in my life, people don’t want to work in daycares,” said Wilson.
She says it is very hard to hire younger workers because there is competition and daycares do not pay as much as other jobs. But she does have luck hiring older women for workers who make extra money to offset high prices.
Since there are not enough workers to fill in positions, employers are anxious to hire. Terry Bankston, the director of the Career Services at Delaware State University, said employers are hired on the spot at Delaware State University Career Fair– to fill in positions . He said college students were able to find jobs quickly and two of the main sectors hiring were hospitality and tourism.
“Mohegan Sun casino, out of the Connecticut area, came in, they had hired two people. Great Wolf Lodge out of the Poconos areas hired three or four, high end hotels hired about five students,” said Bankston.
Since the job market remains tight and wages growth continues to rise, the Fed will make their decision after other data is released.
“We’ll be driven by incoming data, meeting by meeting, and we’ll approach that question at the June meeting,” said Jerome Powell, the chairman of the Federal Reserve.