US job growth beats expectations in April; unemployment rate falls to 3.4%

  • Economy
  • Friday, 05 May 2023

WASHINGTON: U.S. employers boosted hiring in April while raising wages for workers, pointing to sustained labor market strength that could see the Federal Reserve keeping interest rates higher for some time.

Nonfarm payrolls increased by 253,000 jobs last month, the Labor Department's closely watched employment report showed on Friday. Data for March was revised lower to show 165,000 jobs added instead of 236,000 as previously reported.

Economists polled by Reuters had forecast payrolls rising by 180,000. Payrolls are well above the 70,000-100,000 monthly increase needed to keep up with growth in the working-age population.

The unemployment rate fell to 3.4% from 3.5% in March.

Average hourly earnings gained 0.5% after advancing 0.3% in March. Wages increased 4.4% on a year-on-year basis in April after climbing 4.3% in March.

Other measures such as the Employment Cost Index and the Atlanta Fed's wage tracker also show momentum. Wage growth remains too strong to be consistent with the Federal Reserve's 2% inflation target.

The Fed raised its benchmark overnight interest rate by another 25 basis points to the 5.00%-5.25% range on Wednesday, and signaled it may pause the U.S. central bank's fastest monetary policy tightening campaign since the 1980s, though it kept a hawkish bias. The Fed has hiked its policy rate by 500 basis points since March 2022.

Some economists, however, believe that the labor market is overstating the health of the economy, pointing to the divergence between consumer spending and job gains as well as a continued decline in worker productivity.

Consumer spending stalled in February and March. Productivity has declined on a year-year basis for five straight quarters, the longest such stretch since the government started tracking the series in 1948.

Economists also noted that job growth was becoming more concentrated in the leisure and hospitality industry as well as state and local governments, sectors where employment remains below pre-pandemic levels.

With risks of a recession mounting because of the punitive borrowing costs and tighter credit conditions amid financial market stress, the hiring landscape could change quickly.

For now, the general consensus is that the economy will continue to create jobs at least until the fourth quarter. - Reuters

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