Hiring took a giant leap forward in April, suggesting that employers have put aside fears of a looming recession.
Employers added 263,000 jobs to the economy in April, the Labor Department said Friday – considerably more than consensus forecasts of around 190,000. The unemployment rate declined to 3.6 percent, a 50-year low. And average hourly earnings grew 3.2 percent over the last 12 months, slightly lower than the March figure but higher than in all but four months since 2009.
The strong numbers in the monthly jobs report suggests that businesses are optimistic about the economy, and this conclusion certainly matches other recent data. On Wednesday, the Federal Reserve announced that first-quarter GDP growth had grown more than most forecasters expected. Chinese and Eurozone GDPs also topped expectations in the first quarter. And the stock market has rallied this year.
“This is another report that suggests that recession fears were somewhat overblown,” said Rhys Herbert, senior international macroeconomist of Lloyds Bank PLC in London. Hiring in manufacturing was below expectations, he added, but overall this was a very solid report.
Unexpectedly high job creation happened in the context of low inflation. The year-over-year Consumer Price Index increased by 1.9 percent in March, below the Fed’s target inflation rate of 2 percent. Economists say this increase makes the White House’s insistence on cutting interest rates unnecessary. “They are really trying to boost this economy to try to push Trump over the top and get him re-elected,” said Chris Rupkey, chief financial economist of the MUFG financial group, “but the more you push the economy in good times, when you come to bad times, you are not going to have any ammunition.”
Two years ago, many job-seekers would call Brianna Batey, accounts manager at Sedona Staffing Services in Iowa City, or come walking in her door. But for about a year, the number clients hiring has increased, while the number of workers coming to her declined. So now Batey’s company has been increasing its marketing efforts. It expanded from using just its website to using three social media platforms. And it has been actively reaching out to the kind of people it is looking for on networking sites like LinkedIn and employment marketplaces like ZipRecruiter. “We are still able to fill those orders,” she said. “We just have to get a little more creative about it.”
Job gains were highest in professional and business services, construction, health care, and social assistance.
Professional and business services added 76,000 jobs, following an upward trend that began in May 2016. But this number does not reflect employment gains in high-wage industries. “A third of the jump in this number was due to buildings and dwellings,” said Molly Wharton, an economist at Morgan Stanley. “That includes janitorial services and landscapers.” It also includes temp workers.
Construction gains were substantial — 33,000 jobs — after a streak of slower months. Even though the housing market has been a bit slow in recent months, economists believe it is picking up, in part because mortgage rates have been falling. In addition, much of this increase in job creation – 22,000 jobs — has concentrated in the non-residential sector.
Manufacturing gained only 4,000 jobs in April, after no job creation in March. Wage growth in the sector has also been decreasing since November. This is a disappointing performance for the Trump administration, given its efforts to bring manufacturing jobs back to the United States. But the sluggishness in aggregate numbers does not seem to fully reflect market dynamics. “We are seeing a very large number of job postings in manufacturing, and some of the fastest-growing occupations are in manufacturing,” said Julia Polak, labor economist at Zip Recruiter, an employment marketplace. Manufacturing jobs may not be located where the workers are living, creating hiring difficulties, she said.
Retail is in a downward spiral: it lost 12,000 jobs in April, after having lost 13,700 jobs in February and 15,700 in March. “It’s been fashionable to say that stores are going out of existence for a while,” Rupkey said, “and this year, this indeed does seem to be happening.”
Wage increases were not as high as economists expected. Year-over-year wage growth in April remained about the same as in March, but the month-to-month change in average weekly earning decreased by -0.1 percent. Economists say these numbers are disappointing but not worrying. “The underlying trend is still strong,” said Wharton, who attributed the lower-than-expected aggregate number to a concentration of wage growth in low- and medium-paying jobs that are starting to catch up.
Unemployment rate went down from 3.8 percent to 3.6 percent between March and April, but this is to be celebrated with some reserve because the labor force participation rate of the prime-aged population (ages 25-54) also went down during the same period. Lower labor force participation rates signal that some workers have gotten discouraged and consequently stopped looking for work. And to be counted among the unemployed, you must be actively looking for a job.
One group for whom the unemployment rate remains high is 20-to-24-year-olds, reflecting the difficulties that inexperienced young people face when entering the labor market. But that rate has decreased significantly, from 7.6 percent in January to 6.5 in April. Julitza Zapata, 22, of Farmingville, Long Island, graduated from college in December and immediately started looking for jobs. She applied for at least 15 jobs every day but was never called for an interview until two weeks ago. “The hiring process was quick,” she said. “They liked that I was determined.” Having majored in English, Zapata was not yet qualified for the job as a medical biller. “This one gave me a chance to be a trainee,” she said.