The nation’s employers pulled back on their hiring in April but still added a decent 175,000 jobs in a sign that persistently high interest rates may be starting to slow the robust U.S. job market.
Friday’s government report showed that last month’s hiring gain was down sharply from the blockbuster increase of 315,000 in March. And it was well below the 233,000 gain that economists had predicted for April.
Yet the moderation in the pace of hiring, along with a slowdown last month in wage growth, will likely be welcomed by the Federal Reserve, which has kept interest rates at a two-decade high to fight persistently elevated inflation. Hourly wages rose a less-than-expected 0.2 percent from March and 3.9 percent from a year earlier, the smallest annual gain since June 2021.
The Fed has been delaying any consideration of interest rate cuts until it gains more confidence that inflation is steadily slowing toward its 2 percent target. Rate cuts by the central bank would, over time, reduce the cost of mortgages, auto loans and other consumer and business borrowing.
“A slowdown in payrolls to a decent pace to start the second quarter, coupled with a slowing in wage gains, will be welcome news to (the Fed’s) policymakers,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “Current readings also support the view that rates cuts – and not hikes – are the base case scenario for the Fed this year.’’
Even with the April hiring slowdown, last month’s job growth amounted to a solid increase, though it was the lowest monthly gain since October. With the nation’s households continuing their steady spending, many employers have had to keep hiring to meet their customer demand.
Though the unemployment rate ticked up from 3.8 percent to 3.9 percent in April, it was the 27th straight month in which the rate has remained below 4 percent, tying the longest such streak since the 1960s.
“Certainly a cooler jobs report than we’ve seen,’’ said Michael Pugliese, senior economist at Wells Fargo. “But it’s not like it was disastrous: 175,000 is still pretty strong, and unemployment below 4 percent is still pretty healthy.’’ He expects hiring, which averaged a vigorous 242,000 from February through April, to continue to decelerate.
The share of the adult population that either has a job or is looking for one was unchanged at 62.7 percent, well below pre-pandemic levels.
America’s job market has repeatedly proved more robust than almost anyone had predicted. When the Fed began aggressively raising rates two years ago to fight a punishing inflation surge, most economists expected the resulting jump in borrowing costs to cause a recession and drive unemployment to painfully high levels.
The resilient strength of the job market and the overall economy, fueled by steady consumer spending, has kept inflation persistently above the Fed’s 2 percent target.
On a month-over-month basis, consumer inflation hasn’t declined since October. The 3.5 percent year-over-year inflation rate for March was still running well above the Fed’s 2 percent target.
