The U.S. added back another 428,000 jobs in April, performing better than economists expected as the strong labor market recovery encourages Federal Reserve officials to more aggressively raise interest rates in their fight against inflation—even as stocks tumble over the potential implications for earnings growth.
Job gains in April surpassed the roughly 400,000 new jobs economists had forecast, and matched revised estimates for employment growth in March, according to data released Friday by the Labor Department.
Growth was widespread, and led by gains in leisure, manufacturing, transportation and warehousing, the government said.
Despite the better-than-expected gains, the unemployment rate remained flat at 3.6%—close to a prepandemic rate of 3.5% in February 2020, when unemployment was hovering at its lowest level since 1969.
“Amid all the world’s troubles and volatility in financial markets, the job market grinds on,” Bankrate analyst Mark Hamrick said after the release, pointing out that April marked the twelfth consecutive month in which employers added more than 400,000 jobs.
The strong number and elevated wage growth—of 5.5% over the past year—should support the Fed’s plans to raise interest rates to cool rising inflation, “which is being driven in part by the tight labor market,” says Robert Schein of Blanke Schein Wealth Management, predicting wages will likely remain elevated through year’s end.
After losing more than 20 million jobs at the height of pandemic uncertainty in the spring of 2020, the labor market has quickly and forcefully led the economic recovery. “In the face of rising uncertainty, the U.S. economy continues to add jobs at a remarkable rate,” Morning Consult chief economist John Leer said in emailed comments Friday, but he cautioned the growth will be hard to maintain as the Fed raises interest rates in the next few months, adding: “That’s just the way monetary policy works.” The threat of rising interest rates, which tend to hurt company earnings, has battered the stock market in recent weeks, pushing the tech-heavy Nasdaq down more than 22% for the year.
What To Watch For
On Wednesday, Fed Chair Jerome Powell called the “robust” labor market a bright spot for the economy as he instituted the largest interest rate hike in 22 years to help cool inflation, which last month clocked in at the highest rate since December 1981. Over the weekend, Bank of America economist Ethan Harris warned the key risk to the economy is that inflation remains elevated next year. “Recession risks are low now, but elevated in 2023 as inflation could force the Fed to hike until it hurts,” he said. Last month’s consumer price index report will be released on Wednesday, and the Fed’s next policy meeting concludes on June 15.