The Jobs Report – April 2023

Highlight

In April, the economy added 253K jobs ahead of the consensus estimate of 185K, although March’s report was revised lower from 236k to 165k. April’s gain continues to reflect a robust labor market. Private payrolls grew by 230K, also an improvement from last month’s downwardly revised gain of 123K.

What you need to know:

• The unemployment rate decreased from 3.5% to 3.4%. The household survey used in the unemployment rate showed a gain of 139K jobs for April. The unemployment rate declined because, in an unusual statistical outcome, the civilian labor force declined slightly in April. 
• While the headline job gains look impressive relative to the consensus, employment has been trending down over the last six months, likely as a result of the Fed’s efforts to slow the economy and tame inflation. Job gains continued in professional services at +43k, healthcare +40k, and leisure and hospitality, a beneficiary of the pandemic reopening, +31k.   
• April was another month of good news for workers, although not for the Fed, as average hourly earnings rose 0.5% for the month and 4.4% over the past year. While wages continue to lag inflation, employees have seen ongoing increases and have experienced declining prices over the last few months. The Fed raised rates on May 3 and indicated they would monitor incoming data, including employment and wages. April’s wage numbers will not give them comfort, although the trend lower in employment will likely lessen the upward pressure on wages.
• Overall, the jobs report continues the complicated narrative for the U.S. economy with weakening activity but a robust labor market.  Despite the strong headline and solid wage growth in this report, we believe there is enough evidence of a slowdown to permit the Fed to pause its rate hikes. Worries related to the banking industry and other rate-sensitive sectors should give the Fed reason to discount the strength in April’s report as it prepares for its next meeting in June.