The U.S. job market could shift into slow gear this spring, a change in direction that economists have been anticipating for months after a strong recovery from the pandemic shock.
Employers added 175,000 positions in April, lower than expected, the Labor Department reported Friday. The unemployment rate rose to 3.9%.
After an average of 242,000 jobs over the past 12 months, the less intense economic expansion is not necessarily bad news, given that layoffs remain low and most sectors appear stable. isn't it.
“It's not that the economy is bad. It's still a healthy economy,” said Park Pineda, chief economist at the Plastics Industry Association. “I think it's part of a cycle. Given the limitations of the economy, we can't continue to have strong growth forever.”
Wage growth slowed sharply, dropping to 3.9% from the previous year. Faster wage growth in the first quarter, evidenced by stronger-than-expected Employment Cost Index readings, likely reflects pay increases and minimum wage hikes and new union contracts that take effect in January.
Average hours worked per week fell, another sign of declining demand for labor.
The numbers may be welcome news for the Federal Reserve, which has kept interest rates on hold as inflation slumps. Fed Chairman Jerome H. Powell said this week that the Fed is not targeting lower wage growth, but added that sustained wage increases could hinder efforts to curb inflation.
Bond yields fell on the new measure, and while there was some doubt that the Fed would cut rates, some said it could do so before the end of the year, with the S&P 500 trading. It skyrocketed within the first few minutes.
The labor market has defied predictions of a sharp slowdown for more than a year in the face of rapidly rising borrowing costs, a small banking crisis and two major wars. But economic growth slowed significantly in the first quarter, suggesting that the boom that characterized the job market last year may be fading.
Other indicators of deteriorating conditions are rising as well. Job openings are down significantly from their peak two years ago, and worker turnover is lower than before the pandemic.
“It's not surprising that in this economic environment where we've seen a significant easing in labor demand and where interest rates remain high, employment is also slowing,” said Lydia Boussour, senior economist at consulting firm EY Parthenon. Ta. “We are also seeing cost fatigue among consumers and businesses, putting downward pressure on private sector activity.”
Employment statistics for February and March were better than expected, but the unusually warm winter may have been a tailwind. Employment growth has been limited to a few industries, a trend that continued in April, with health care accounting for one-third of the growth.
Employment in the leisure and hospitality industry has remained essentially flat, halting what had been fairly rapid growth as the industry approached pre-pandemic staffing levels.
Stagnation in interest rate-sensitive sectors like technology and manufacturing has been offset by unabated growth in industries like health care, driven by aging demographics, and state and local governments are seeing more Even after losing workers on good terms, they are catching up. Pandemic.
Federal funding has supported construction work on large infrastructure projects and private investment in clean energy development, as well as subsidies for industries such as child care that continue to filter through the economy. .
“It depends on where you land, but ultimately it's a question of how many people end up working for the government in some capacity,” said Belinda Roman, an associate professor of economics at St. Mary's University in San Antonio. .
Wages have risen (almost a year above the average rate of inflation), more people are looking for work, and employers are able to fill positions more quickly. The growing influx of legal and illegal immigrants added about 80,000 workers to the labor supply each month last year and is expected to add another 50,000 each month this year, according to Goldman Sachs calculations. .
And beyond public spending, much of the lasting power comes from purchases by households that have depleted bank balances built during the pandemic. As savings rates fall and consumer loan delinquency rates rise, the rocket will likely run out of fuel and be left with a fundamentally healthy economy.
“We still expect what we would call a mild economic slowdown, but things are improving again,” said Stephen Brown, deputy chief North American economist at Capital Economics. “The average worker won't notice any slowdown.”