The US economy added fewer jobs than expected in April, signaling that months of surprising growth may finally be slowing.
The Bureau of Labor Statistics reported that employers added 175,000 new jobs in April, well below economists’ expectations of around 240,000 new jobs and below the monthly average of 269,000 in the first quarter of 2024. The unemployment rate ticked up slightly to 3.9 percent from 3.8 percent in March.
The lower-than-expected number of new jobs, combined with the slight increase in the unemployment rate and the decline in wage growth, may be a signal that the economy is beginning to cool in response to months of high interest rates maintained by the Federal Reserve.
“If I were a Federal Reserve governor, this would be a relief,” said Michael Strain, the director of economic policy studies at the American Enterprise Institute, referring to members of the Federal Reserve board who vote on interest rate increases or decreases.
“It showed enough of a moderation in the labor market not to compound the sense that the economy is re-accelerating, but it was still solid enough of a report not to provoke concern that the labor market was rapidly deteriorating.”
If the labor market continues to cool such that the unemployment rate ticks up significantly in the next few months, the Fed might consider lowering rates this year. Since July, the Fed has maintained rates at 5.25 - 5.5 percent to combat inflation, which remains stubbornly above its target of 2 percent.
However, on Friday last week, the Fed’s preferred measure of inflation showed that prices rose 2.7 percent in March over the previous year, prompting some economists to speculate that the Fed will delay rate cuts until inflation begins to come down.
“Even though we do have softer employment and softer wages, inflation is running still too hot,” said Kenneth Kim, a senior economist at KPMG. “We think the Fed will cut [rates] one time this year, which is in December.”
Jared Bernstein, the Chair of the Council of Economic Advisors, an agency within the Biden Administration, presaged the possible slowdown in jobs on Tuesday in remarks at the Economic Club of New York.
“We’ve seen cooling demand in the labor market – it remains very strong, but the vacancies have come down,” he said on Tuesday. “And most importantly, nominal wage growth has decelerated,” he later added. (The term ‘nominal’ refers to a metric that hasn’t been adjusted for inflation).
He also called this economy “one of the more remarkable periods of macroeconomics that I’ve lived through,” in line with President Biden’s assessment that “the great American comeback continues” following the BLS’s release. In contrast, Donald Trump called today’s jobs report “horrible.”
Data on hourly wages – another closely watched metric – that was released on Friday show that wages indeed continued to cool in April. Wages in April grew 2024 3.9 percent over April 2023. While this is faster than ideal to reduce inflation to the 2 percent target, it represents an improvement from 6 percent wage growth in 2022, when the Fed began raising rates.
“If you zoom out and look at the behavior wage growth over the past couple of years, you see that we’ve made substantial progress,” said Strain. “Over the last 6 months, wage growth is very gradually cooling down.”
The overall increase in jobs last month was fueled by the health care and social assistance sector, which contributed 87,000 jobs, or almost half of all jobs added in April. The sector has experienced consistent growth in the wake of the pandemic. In contrast, the leisure and hospitality sector, which had grown steadily this year, slowed last month to add only 5,000 new jobs, down from 53,000 the previous month. The public sector, which had also been the source of jobs growth in 2024, added only 8,000 jobs, down from 72,000 in March.
Despite the growth in the health care industry, business at New Jersey-based Interim Healthcare has been flat over the last three months as local hospitals and health care systems have consolidated. Interim is a boutique health care staffing company that serves northern New Jersey, with around 100 working at a time.
The other part of its business, hiring out home health aides and nurses to work in private homes, has done well, said chairman and CEO Jeff DeJoseph, in part due to the strong relationships that his staffers have built with their clients: in some cases, aides from his company have even been asked to give eulogies at clients’ funerals.
Most of his staffers are immigrants, from Ghana, Jamaica, and other parts of the Caribbean.
“If it weren’t for immigration, there’d be no health care industry,” he said. “But they’re a forgotten demographic.”
Immigration is considered a driving force behind the recent job growth data. The increase in foreign-born workers has allowed the economy to add more jobs without raising the unemployment rate.
Jobs in temporary help services, which have declined steadily in 2024, fell by more than 16,000 last month. The number of people on assignment from a branch of Remedy Intelligent Staffing – which provides staff to third party logistics companies in central and northern New Jersey – was down 60 percent over the previous April.
Franchise owner Silvia Caravella says her clients, which include luxury brands, are experiencing significant declines in business after a boom during the pandemic. This decline, combined with a provision in the New Jersey Temporary Workers’ Bill of Rights that increases wages for temporary workers to match those of permanent employees, has dampened business.
“If they’re down, we’re down because they don’t need people from us anymore,” she said. “Now they’re trying to do more with less.”
Despite the pain some employers feel, the cooler job growth last month may be a signal that the economy can achieve a soft landing after all.
“The softening labor market will hopefully cool demand enough to continue that path toward disinflation,” said Kim. “That will provide some relief [from] inflation to families and households.”