US job market shows signs of cooling, with just 175,000 jobs added in April

The leisure and hospitality sector was the poster child of the employment devastation wreaked by the pandemic, losing half of its workforce (a whopping 8 million jobs) in two months.

The March jobs report this year seemed to indicate that this sector had finally reached its pre-pandemic employment levels.

Not so fast, my friend.

Following revisions to recent months’ employment estimates, the key consumer-facing industry is back to being just shy of pre-pandemic form. As of April, there were an estimated 16.897 million leisure and hospitality workers versus 16.899 million in February 2020, according to Bureau of Labor Statistics data.

The leisure and hospitality industry, which was one of the key employment drivers in 2022 and 2023, saw a net gain of only 5,000 jobs last month.

Federal data is frequently subject to change as more detailed and accurate information becomes readily available. The monthly jobs report is no exception: The initial monthly estimates are revised twice more (and subject to later annual benchmarking revisions).

The overall revisions seen in April were comparatively mild to those seen in the past. February’s and March’s estimated gains were revised down by a combined 22,000 jobs. February’s estimates dropped by 34,000 to 236,000 net jobs added, while March’s strong job gains of 303,000 were revised up by 12,000 to 315,000.

The employment rate of women in their prime working years just hit an all-time high in April.

The labor force participation rate for women between the ages of 25 and 54 climbed 0.3 percentage points to 78% last month, Bureau of Labor Statistics data shows.

In recent years, women’s labor force participation rebounded from a pandemic “she-cession” and returned to its pre-pandemic form of making progressively historic labor market gains.

Prior to the pandemic, women’s labor force participation rates rose faster than their male counterparts as female-dominated industries such as health care and caregiving saw rapid growth; educational attainment for women rose substantially; and there were greater inroads by women into traditionally male-dominated fields such as construction, agriculture, and maintenance.

Since the pandemic, other developments helped serve as further drivers: increased work flexibility and strong job gains in female-dominated industries such as health care.

Bill Adams, chief economist for Comerica Bank, said better labor force participation was one of the main reasons why the overall unemployment rate ticked higher in April to 3.9%.

“The employment-population ratio for workers ages 25-54 was near the highest since 2022 and for workers 16-24 was near the highest since 2008,” Adams wrote in a note on Friday.

Still, the overall labor force participation rate (workers 16 and older) was unchanged at 62.7%, nearing its post-pandemic high. Labor force participation rates have been on the decline since 2000 due to demographic shifts (largely, aging Baby Boomers). The pandemic effects (early retirements, deaths, long-Covid, caregiving needs) have played a role as well.

Friday’s jobs report helped to quell concerns that Black Americans were seeing a steady rise of unemployment.

The jobless rate for Black workers in April fell back down to 5.6%, a rate last seen in February, after suddenly spiking to 6.4% in March, the highest since August 2022.

When that rate rocketed higher, economists cautioned that it was likely (and hopefully) a statistical anomaly. The household survey that feeds into the jobs report is typically more volatile, so it was possible that sudden leap wasn’t fully representative.

The return to 5.6% in April was reassuring, Elise Gould, senior economist for the Economic Policy Institute, told CNN in an interview.

It’s certainly a measure to keep watching she said, adding that it’s viewed as a “canary in the coal mine.”

“When things are going to get soft in the labor market, historically disadvantaged groups are often going to feel that first,” she said. “It’s still important to keep an eye on, but I think it’s promising that it has dropped.”

Since the pandemic started to ease, US employers have added hundreds of thousands of jobs each month. For instance, in 2022, employers added an average of nearly 400,000 jobs each month and in 2023, they added around 225,000.

So, compared to that, April’s 175,000 gains may sound paltry. But it’s certainly nothing to sneeze at, looking back in time.

Though it’s slightly below the 183,000 average monthly gains in the decade before the pandemic, it’s well above the 125,000 average gains from 1939 to 2019. It’s also above 2019’s average monthly gains of 166,000 jobs.

Chicago Federal Reserve President Austan Goolsbee views April’s 175,000 job gains as “very solid.”

It’s a sign the economy is shifting back toward pre-Covid “conventional times,” he said Friday in a Bloomberg TV interview.

“In a previous world, if you said you know you’re getting jobs numbers in the 175,000 to 200,000 range, people would be quite happy with that,” he said.

Goolsbee, who isn’t voting on monetary policy decisions this year, didn’t want to say whether or not this jobs report would make him more supportive of rate cuts this year — or rate hikes, which some of his colleagues have floated recently.

But jobs reports like April’s are a positive development in that they give officials more confidence that the economy is not overheating, he added.

President Joe Biden acknowledged that America’s job market remains strong, saying in a statement that “the great American comeback continues,” even after the latest batch of employment figures came in below expectations.

“When I took office, I inherited an economy on the brink, with the worst economic crisis in a century,” he said in a statement Friday.

“Now we are seeing that plan in action, with well over 15 million jobs created since I took office, working-age women employed at a record high rate, wages rising faster than prices, and unemployment below 4 percent for a record 27 months in a row.”

Americans’ paychecks grew at a slower pace last month, but wage growth remains strong and April’s softer earnings figures could be viewed favorably by the Federal Reserve, which is still fighting inflation.

Private-sector workers earned $34.75 an hour in April, on average. That was up 7 cents from March, or 0.2%. From a year earlier, wages grew 3.9% in April, which was the weakest annual rate since May 2021. That’s not particularly concerning because workers are still commanding historically strong wage gains — by a very comfortable margin, too.

Annual wage growth never rose above 3.6% from 2007 (the earliest available data) to the spring of 2020, when the Covid-19 pandemic distorted economic data. Wage gains still have a way to go before even returning to pre-pandemic levels — and they’re still outpacing inflation.

But the steady slowdown over the past few years, since reaching a peak in March 2022, is generally seen as a good thing by the Fed. The central bank has been fighting inflation for about two years now and a tight labor market is seen by officials as a potential source of inflationary pressure. They want wage growth to “be consistent” with their inflation target of 2%, so cooling wage gains could help them tug inflation lower. Workers can still command robust wages — if productivity growth is at the very least keeping up. It remains to be seen if 2023’s burst of productivity will persist. 

US stocks soared higher on Friday morning after new data showed that US job growth slowed considerably last month.

The Dow opened more than 530 points higher, the S&P was up 1.2% and the Nasdaq Composite gained 1.8%.

The US added just 175,000 new jobs in April, according to Bureau of Labor Statistics data released Friday. That’s far below economists expectations for 235,000 jobs and the 315,000 jobs added in March. The unemployment rate ticked higher as well, to 3.9% from 3.8% the month before.

While that’s bad news for Main Street, Wall Street celebrated the news.

That’s because the Federal Reserve is working to slow the economy by hiking interest rates — the only tool it has to fight inflation. A still-robust job market means the central bank could continue to keep rates elevated without fear of sending the economy into a recession. If the labor market weakens, the Fed is more likely to consider a rate cut.

For the first time in a while, the latest US employment figures came in below economists’ expectations. Job growth in April was sharply weaker than in the prior month and the unemployment rate edged higher, instead of holding steady as economists projected. The job market clearly slowed down this spring, but it remains robust.

Fed officials have said they want to see the job market come “into better balance” to help bring inflation lower. They got that with the April jobs report. But they’re not necessarily popping champagne bottles, either.

For starters, this is just one month’s data, so it remains to be seen whether this softening momentum will continue. Fed Chair Jerome Powell also said in his latest news conference — after the central bank held interest rates steady for the sixth-straight meeting — that policymakers would be concerned to see an “unexpected weakening in the labor market.”

That means officials prefer to see a steady and orderly slowdown.

A string of unexpectedly weak labor data in the coming months could force officials to consider cutting rates sooner than expected, since the Fed is also mandated by Congress to maximize employment, in addition to stabilizing prices.

It’s too soon to tell whether April was just noise or the start of a trend, but at least the Fed doesn’t have worry about the job market heating back up.

Here’s how Wall Street is reacting to the lower-than-expected numbers:

Friday’s jobs report showed the US unemployment rate inched closer to 4%, coming in at 3.9%. It hasn’t crossed that mark in more than two years, a remarkable streak that hasn’t been matched in decades.

But many economists thought the jobless rate would be well above 4% by now, given all the rate hikes aimed at slowing the economy to curb inflation. Well, it may only be a matter of time before the streak of a sub-4% unemployment ends.

What would that mean for the Federal Reserve? Not a whole lot, Fed Chair Jerome Powell said Wednesday.

It would take a material weakening in the labor market to catch central bankers’ attention and potentially cause them to consider cutting rates sooner.

A couple of tenths of a percentage point increase in the unemployment rate “would probably not do that,” Powell said.

If you’re in the market for a new job, you’re most likely to get hired fastest if you’re applying for roles within health care and social assistance, accommodation and food services as well as state and local government.

That’s because these industries had the greatest number of job openings, according to the Bureau of Labor Statistics’ March Job Openings and Labor Turnover Report.

In recent months, economists have been missing the mark on the number of people employers hired, typically underestimating it. For instance, they predicted 205,000 new jobs would be added in March, but instead, a whopping 315,000 jobs were added, according to newly revised figures from the Bureau of Labor Statistics.

But April was an exception in that economists overestimated the number of job gains predicting 235,000 new jobs whereas employers added 175,000, a difference of 60,000 jobs.

US job growth slowed considerably last month, with just 175,000 positions added in April, according to Bureau of Labor Statistics data released Friday.

The slower-than-expected gains could be a sign that the Federal Reserve’s 11 rate hikes have put a damper on labor demand.

The unemployment rate ticked higher to 3.9%, according to the Bureau of Labor Statistics. April marks the 27th consecutive month that the jobless rate has held under 4%, matching a streak last seen in the late 1960s.

Economists were expecting 235,000 jobs were added last month, down from March’s revised estimate of 315,000; and for the jobless rate to hold steady at 3.8%, according to FactSet consensus estimates.

Economists are forecasting that US employers added 235,000 jobs in April, which would be down from the estimated 303,000 net jobs added in March, according to FactSet consensus estimates. The unemployment rate is expected to stay at 3.8%.

If those expectations hold true, some already historic streaks would grow. It would be the 40th consecutive month of employment expansion (the fifth longest on record) and the 26th month in a row that the nation’s jobless rate held below 4% (nearly matching a 27-month streak from 1967 to 1970).

So far this year, the economy has added, on average, 276,000 jobs per month, Bureau of Labor Statistics data shows. That’s about 25,000 more jobs per month than last year and 111,000 more per month than in 2019.

The good news: Workers’ wage gains are outpacing inflation and have been for almost a year now. That means it’s easier to afford the higher cost of living as opposed to recent years when price increases completely wiped out wage gains.

The bad news: The wage gains are slowing but not by as much as the Federal Reserve would like to help rein in inflation. The slower pace of pay bumps is a sign that workers are losing some of the leverage they gained post-pandemic. But workers’ earnings are still growing faster compared to before the pandemic.

“The labor market, it’s as good as it’s ever been,” Mark Zandi, chief economist with Moody’s Analytics, told CNN. “It’s not hyperbole; I’ve been doing this 35 to 40 years, and I’ve never seen anything like it.”

The leading factors that have helped the economy churn out month after month of solidly strong job gains have economists believing that streak will continue.

The latest layoff report from outplacement firm Challenger, Gray & Christmas showed that far fewer job cuts were announced in April than any month so far this year.

Challenger reported Thursday that US employers announced 64,789 job cuts last month, down 28% from March and 3.3% below April of last year.

“The labor market remains tight, but as labor costs continue to rise, companies will be slower to hire, and we expect further cuts will be needed,” Andrew Challenger, the firm’s senior vice president, said in a statement. “This low April figure may be the calm before the storm.”

Cost-cutting was the reason behind the lion’s share of the cuts; however, the report noted that a small slice of the month’s losses were attributed to artificial intelligence (800 cuts) and Texas’ new law curtailing diversity, equity and inclusion (DEI) initiatives at higher education institutions (80 job cuts).

While a hotter-than-expected labor market — and, especially, stronger-than-typical wage gains — may seem to fly in the face of the central bank’s desire to lower inflation, Federal Reserve Chair Jerome Powell said Wednesday the labor market is an example of the central bank’s monetary policy in action.

“Demand is still strong — the demand side of the labor market, in particular,” Powell said during the Fed’s post-meeting press conference. “But it’s cooled from its extremely high level of a couple of years ago.”

The labor market remains relatively tight, but supply and demand conditions have come into “better balance,” Powell said.

He noted the latest labor turnover data: On Wednesday, the BLS’ Job Openings and Labor Turnover Survey for March showed that job openings fell to a three-year low, hiring pulled back and fewer people quit their jobs.

Productivity, which enables the economy to grow without rising inflation, is on the rise.

“[Productivity is] the secret sauce to sustainable expansion,” Nick Bunker, economic research director for North America at the Indeed Hiring Lab, told CNN.

However, Bunker, fellow economists and even Federal Reserve Chair Jerome Powell are still trying to get their arms around the extent of the productivity growth in the US.

“It’s a really important, but incredibly volatile, quarterly measure,” Bunker said.

The BLS on Thursday released a fresh batch of productivity data that showed productivity growth in the first quarter picked up by 0.3% from the fourth quarter of last year, falling below economists’ expectations for a 0.9% gain.

“Nonfarm business sector labor productivity growth was weaker in [the first quarter], but don’t forget this comes on the back of three consecutive quarterly [gains] of more than 3% — a rare feat that occurred once in the pre-Covid decade,” Gregory Daco, EY Parthenon chief economist, posted Thursday on X.

Unit labor costs, or how much a business pays its workers to produce one unit of output, soared well above expectations, with a 4.7% quarterly increase.

From the year before, productivity and unit labor costs are up 2.9% and 1.8%, respectively.

In addition to high labor force participation rates among prime working age individuals, specifically prime working age women, the US labor market is benefiting from a boom in immigrant workers.

As of March, the number of employed foreign-born workers set a fresh record high of 31.1 million people, BLS data showed. The labor force participation rate of those workers was 65.9%, nearly 4 percentage points higher than the rate for native-born workers last month.