WASHINGTON – U.S. employers increased 428,000 jobs in April, extending the long-term hiring belt that challenged inflation, chronic supply shortages, Russia’s war against Ukraine and much higher loan costs.
Friday’s report on the jobs of the Department of Labor showed that last month the unemployment rate remained at 3.6%, slightly above the lowest level in half a century.
Wage growth in the economy has been extremely stable amid the worst inflation in four decades. Employers have added at least 400,000 jobs over 12 consecutive months.
At the same time, job growth in April along with steady wage growth will help fuel consumer spending and is likely to support the Federal Reserve towards a sharp rise in lending rates to fight inflation. Early trading on Friday in financial markets showed concern that the strength of the labor market will keep wages and inflation high and will lead to ever-higher borrowing costs for consumers and businesses. Higher lending rates can, in turn, hamper corporate profits.
“Because labor market conditions are still so strong, including very rapid wage growth, we doubt the Fed will abandon its hawkish plans,” said Paul Ashworth, chief U.S. economist at Capital Economics.
Recent employment data contain several cautionary remarks regarding the labor market. The government has revised its estimate of job growth for February and March by 39,000 combined.
And the number of labor force in April decreased by 363 thousand, which was the first since September. Their output slightly reduced the proportion of Americans working or looking for work from 62.4% to 62.2%. Many industries have slowed down due to labor shortages. The country still has 1.2 million jobs ashamed of the number it had in early 2020, shortly before the pandemic hit the economy.
“We need to get these people back,” said Beth Ann, chief economist at S&P Global.
Bovina noted that some Americans are staying away from the workforce because of long-standing concerns about COVID-19 or because of difficulties in finding affordable kindergartens for unvaccinated children.
Last month, employers continued to raise wages. Hourly wages increased by 0.3% compared to March and 5.5% compared to last year. But prices are rising faster than wages.
“Yes, we have seen wage growth,” Bovino said. But with inflation at a 40-year high, “people are still pressed.”
Last month, hiring was widespread in all areas. 55,000 jobs have been created in the factories, the most since July last year. Warehouses and transport companies added 52,000, restaurants and bars 44,000, healthcare 41,000, finance 35,000, retailers 29,000 and hotels 22,000. Construction companies, slowed by a shortage of labor and materials, added just 2,000.
It is unclear how long the job boom will last. This week, the Fed raised the key rate by half a percent – the most aggressive step since 2000 – and signaled a further significant rate hike. As the Fed’s rate hike takes effect, they will become more expensive to spend and hire.
In addition, the government provided enormous economic assistance to households. And Russia’s invasion of Ukraine has helped accelerate inflation and clouded economic prospects. Some economists warn of an increased risk of recession.
Currently, the stability of the labor market is particularly striking against the background of rapid price increases and rising cost of loans. This week, the Ministry of Labor presented additional evidence that the labor market is still thriving. It reported that only 1.38 million Americans received traditional unemployment benefits, the lowest since 1970. In March, employers posted a record high of 11.5 million vacancies and that layoffs remained well below pre-pandemic levels.
Moreover, now in the economy there are on average two jobs per unemployed person. This is the highest such share of all time.
And another sign that workers are enjoying an unusual lever of influence in the job market, a record 4.5 million people quit their jobs in March are clearly confident they can find better opportunities elsewhere.
The chronic shortage of goods, materials and labor has contributed to the rapid rise in prices – the highest inflation rate in 40 years. Russia’s invasion of Ukraine in late February dramatically worsened the financial landscape, raising world oil and gas prices and severely clouding the national and global economic picture.
The Fed, which most economists say was too slow to recognize the threat of inflation, is now aggressively raising rates. Its goal is obviously difficult: the so-called soft landing.
“Trying to slow the economy down enough without causing a recession,” said Rubila Farooki, chief US economist at High Frequency Economics. “Their track record in this is not particularly good.”