Employment growth slows more than expected
Job growth is much slower than expected in April, Promoting a vision of multiple rate cuts The stock market will soar this year.
Employment increases seasonally adjusted 175,000 The Labor Department announced Friday that April. This was significantly lower than the upwardly revised figure of 315,000 in March, and also lower than economists’ expectations of around 240,000.
This was something of a shock to the market, as employment numbers have consistently exceeded expectations. The number of print jobs fell short of the Econoday survey’s lowest estimate of 190,000 people. In other words, no one saw this comingThis helps explain why the market reacted so strongly to the news.
Bad news is good news…but it wasn’t that bad.
The cliché is “bad news is good news.” And some social media users complained on Friday: The stock market seemed to be celebrating people losing their jobs. But that wasn’t what happened in April. There were very few layoffs. Employment growth was weaker than expected, but neither bad nor weak. 175,000 would seem like a very respectable number if recent employment growth hadn’t been so great.
Traders work on the floor of the New York Stock Exchange (NYSE) on May 3, 2024 in New York City. The Dow Jones Industrial Average rose in morning trading as the latest jobs report raised hopes that the central bank would cut interest rates sooner than expected. (Spencer Pratt/Getty Images)
The unemployment rate rose from 3.8% to 3.9%. However, the movement smaller than it looks. The unemployment rate for March is 3.82917% without rounding, and when rounded it is 3.8. In April, it was 3.86469, which was rounded off to 3.9%. In other words, the increase in the unemployment rate was only a fraction of the actual percentage point, 0.03552 points.
The actual number of unemployed people increased by 63,000 people, and the civilian labor force increased by 87,000 people.of Total number of employees According to the household budget survey, the number of people increased by 25,000. Employment among prime-age workers aged 25 to 54 increased by 163,000. Participation rate remained unchanged at 62.7 percent, while employment as a percentage of population declined slightly from 60.3 percent to 60.2 percent.
The private sector added a huge 167,000 jobs, while government payrolls increased by just 8,000. Federal government payrolls increased by 2,000 jobs in line with recent growth, while local and state governments only increased by 6,000 jobs. In total, government payrolls were at their lowest level since December 2022 and down sharply from the 72,000 recorded the previous month.this Public sector employment softening This is one reason why the total number was lower than expected.
Health care added 56,000 jobs, just below the 63,000 average over the previous 12 months. Social assistance rose by 31,000 people, above the 12-month average.These are both commonly considered employment categories neighboring government It also does not necessarily reflect the health of private sector labor demand. But even after these, the cyclical private sector gain of 76,000 is not that weak.
Leisure and Hospitality Employment Goes on Spring Break
The service sector saw an increase of 153,000 people, which was lower than expected. The root of this weakness is There are few jobs in leisure and hospitality., only 5,000 jobs were added. Several factors may explain this weakness.
Imposition of Minimum wage in California is $20 That’s because fast-food workers are likely to see a negative impact on employment at affected companies, and even hiring outside of California could slow if other companies expect similar price increases. The early arrival of Easter may also have disrupted some of the seasonal adjustments. Companies are experimenting with robots and AI customer service in drive-thrus. Finally, employment in this part of the economy has caught up to pre-pandemic levels. The era of catch-up hiring is probably over..
The Raising Cane fast food restaurant sign on Route 66 in Azusa, California, photographed April 1, 2024. (Robert Gauthier/Los Angeles Times via Getty Images)
The best news in terms of rate cuts is probably Hourly wage growth slows down. These increased by 0.2% month-on-month and by 3.9% year-on-year. The threat that California’s minimum wage hike would boost wage growth does not appear to have materialized in this report.
Irrational enthusiasm about possible rate cuts
The market reaction seems overdone. It’s not enough to do half-hearted hiring for a month after months of very strong employment data. Move the Fed into rate-cutting mode early. But for those itching for a rate cut, it’s a step in the right direction. Unlike his first three-month report, this one doesn’t keep the needle away from the cut.
In short, we agree with the following assessment: Ol Sonorasaid Fitch Ratings’ head of US economic research.
For those hoping for a quick rate cut, this slowdown in employment growth is good news, and the slowdown in wage growth is even better news. But trends don’t form in one month, so the Fed will need to see this kind of easing continue for several months, combined with improving inflation data, before it resumes rate cuts sooner rather than later.
We still think it’s unlikely the Fed will find an opportunity to cut rates before November, and there’s a good chance the Fed is done. Hike instead of cut. But today’s jobs report pushes that possibility a little in the opposite direction.
