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April employment rose by 175,000, a marked slowdown from the 315,000 gain in March. Much of the slowdown was from reduced hiring in leisure and hospitality, and state and local government. It may be that the strong rehiring trend in these two sectors after the pandemic has finally run its course. But another month of data is needed to see if this is a new trend or not.
Elsewhere, there was little evidence of a slowdown: Health care continued its usual strong gains. Retail, wholesale, transportation and warehousing reported above-average increases. Temporary help did show a drop in April and has fallen in 23 out of the past 24 months. But that may be the result of temp workers getting hired as permanent employees, given the previous labor shortages.
The unemployment rate edged up to 3.9%, with slightly more workers losing their jobs. Other signs of modest weakening: The number of workers being forced to work part-time, due to a lack of full-time opportunities, rose and fewer potential workers came into the labor force to look for work.
Annual wage growth slowed to 3.9% in April, the first time that wage growth has been below 4% in nearly three years. Pay raises should end the year at about a 3.3% annual clip. Wages of nonsupervisory employees are growing at 4.0%, but they are slowing even faster than for other employees after an extended period of faster growth and should end the year at about 3.0% growth.
April’s jobs and wage slowdown was welcomed by financial markets, as it may lead to a summer interest rate cut by the Federal Reserve. However, better inflation reports are still needed for that to happen. The Fed will be heartened by the easing trend in wage growth, which would put less pressure on businesses to raise prices. Odds are that the first rate cut won’t take place until after the election, but several months of slower job creation and wage gains, plus better monthly inflation reports, could possibly induce the Fed to act as soon as its July 31 policy meeting.
