WASHINGTON–Despite the Fed’s efforts to cool the economy, new federal data show employers added 253,000 jobs in April—but one CU economist said a deeper look reveals the numbers aren’t quite as strong as they seem.
According to the Labor Department, the latest jobs data show the unemployment rate declined a bit to 3.4% in April, down from 3.5% in March, matching the level in January, which was the lowest since 1969."
“April was another good month for job growth, which established yet another 50-year low for the unemployment rate,” noted NAFCU’s chief economist, Curt Long. “However, significant downward revisions to prior month job gains temper the outlook. This report shows that despite threats from the debt ceiling standoff and banking sector stress, the real economy keeps motoring along. Meanwhile, the absence of a major inflationary impulse will reassure the Fed that it can safely pause rate hikes."
CUNA View: Rewriting the Textbooks
“The U.S labor market is hot. The U.S. Bureau of Labor Statistics today reported that April nonfarm payroll employment increased at a faster than expected pace – with 253,000 jobs added during the month," said CUNA Chief Economist Mike Schenk. "The unemployment rate declined from 3.5% in March to 3.4% in April and wage gains came in at 0.5% during the month. All of which flies in the face of the Federal Reserve’s aggressive efforts to reign in borrowing and spending to bring stubbornly high inflation down.
“Authors are likely tempted to re-write macroeconomic textbooks. This isn’t the desired result and, in many respects, it’s historically unprecedented. Both the labor force participation rate and the employment-to-population ratio were unchanged in April, at 62.6% and 60.4% percent respectively.
“Previous month’s employment increases were revised down modestly. But year-over-year increases in average hourly earnings were elevated at 4.4% - well above the 3.0% level that would be consistent with inflation at the Fed’s desired 2.0% target.
“The big take-aways in this month’s surprisingly strong report is that the Fed is now more likely to increase market rates again and also is likely to keep rates high for longer than previously anticipated," Schenk concluded.
Downward Revisions
Earlier this week, following the May meeting at which the Federal Open Markets Committee voted to raise interest rates another 25 basis points, Fed Chair Jerome H. Powell had indicated the central bank might continue to raise rates if new data showed the economy wasn’t slowing enough to keep prices down.
The Labor Department report shows downward revisions to previous two months have made a meaningful difference in the spring employment numbers, with some 149,000 jobs subtracted from the numbers. As a result, analysts said that means the April number is less than the average of 290,000 jobs added over the past six months, but a reacceleration from the 165,000 jobs added in March.
The jobs report shows leisure and hospitality added 31,000 jobs, down from a 73,000-job average over the past six months, but another step toward its high in early 2020, the New York Times noted.
The Times also noted that a rebound in immigration eased labor shortages, especially in fields such as leisure and hospitality and health care, allowing those to continue to grow quickly.
“I think one of the clearest implications that we’ve seen from the increased flows of work visas is the easing of supply constraints and the uptick in participation,” said Courtney Shupert, an economist at the consulting firm MacroPolicy Perspectives, told the Times.