April Jobs Report: Mayday

The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor Chief Economist Aaron Terrazas.

The job market accelerated unexpectedly in April, continuing a string of months of repeatedly appearing to resist gravity. Employers continued to hire across the economy – including in white collar sectors that had been expected to slow sharply. The unemployment rate dipped returning to the lowest levels on record since the late 1960s, and hourly earnings accelerated reversing March’s slowdown. This was not a report that anyone had hoped for, and compounds the risks the  U.S. economy faces in May – including the likelihood that further interest rate hikes lie ahead.

Payroll Employment Growth Accelerated on Prior Month Downward Revisions

Payroll growth accelerated from 165,000 in March (revised sharply down from 236,000) to 253,000 jobs. Downward revisions to both the March and February payroll gains suggest that the labor market was substantially softer than initially reported – challenging the prevailing narrative that the jobs market continued to hum steadily along through the spring.

Industry detail suggests steady gains, including in some unexpected places. Leisure & hospitality (+40,000 jobs added) and health care & social assistance (+31,000) continue to power jobs growth, but so did Professional & Business Services (+43,000) and Finance (+23,000) – two sectors which many have assumed would be softer in light of recent layoffs. Employment services continued to shed jobs (-23,800).

Unemployment Rate Dips

The unemployment rate dipped to 3.4 percent in April, matching the low point reported in January and the lowest unemployment rate going back to 1969. The number of permanent job losers, which had steadily increased through the first quarter of the year, also fell back.

Spring usually sees a seasonal surge in unemployment as new college graduates think past senior week and enter the labor market in earnest. That seasonal uptick could be larger than normal this year due with fewer open internships and entry level roles. Indeed, the number of unemployed new labor market entrants increased and is now at its highest level in six months. Having lived much of their higher education amid the throes of the pandemic, the Class of 2023 is now encountering yet another set of headwinds on their journey to adulthood.

Labor Force Participation Levels Off

After notching meaningful gains during the first three months of 2023, labor force participation stalled in April, holding at 62.6 percent – still 0.7 percentage points below where it stood in January 2020. The consensus among economists is that the residual gap in participation relative to pre-pandemic norms is the result of demographic aging, and the prime-age labor force participation rate is now on par with where it stood on the eve of the pandemic.

As hiring and wage gains slow late in the business cycle, and potentially in response to mandatory return-to-office policies, there is little upside risk to labor force participation.

Wage Growth Accelerates

Average hourly earnings growth accelerated to 0.5 percent month-over-month in April, or 4.4 percent year-over-year, reversing a slowdown in March. Many large companies implement annual performance reviews at the start of the calendar year, and associated pay changes are usually implemented in the springtime. Recent statements of budget restraint at many of the nation’s largest companies have yet to appear in the earnings data.

Conclusion

Despite a new round of turmoil in the banking sector over the past week, and a continued steady drip of layoff announcements, there continues to be a gaping chasm between what people are feeling and what labor market data are saying. Today’s report compounds the risks facing the economy over the weeks and months ahead.

Now 14 months since the Federal Reserve first began to lift interest rates, we are at the outer Federal Reserve officials have been explicit that they believe that the labor market remains far too tight to be consistent with their mandate of stable price gains, particularly in light of the extraordinary degree of monetary tightening over the past year. There are other risks on the horizon as well — most obviously the volatile banking crisis and the uncertain outcome of federal debt ceiling negotiations. A possible U.S. default in the coming weeks would be a major disruption for the economy, and could potentially delay the release of May jobs data.

More Insights

Three years ago, the unemployment rate hit a record high 14.7 percent as the pandemic began. This April, the unemployment rate dropped to 3.4 percent, tying the low we hit before the pandemic which itself was the lowest since 1969.

The Black unemployment rate dropped to 4.7 percent in April, hitting another record low since data began in 1972.

Prime-age (age 25–54) labor force participation rose to 83.3 percent in April, the highest level since 2008. The prime-age employment population ratio rose to the highest level since 2001.

One concerning trend in last month's report was the rise in permanent job losers as a share of total unemployment. Its rise in the past has coincided with the 2001 and 2008 recessions, though the measure fell slightly in April. There are not many historical episodes to compare against for this series, but it is an early indicator to watch.

Employers added 253,000 jobs, a slower pace than much of 2022, but February & March were downwardly revised by 149,000. Post-revisions, the start of the year was much slower than originally reported, but job gains remain healthy.

Employment growth was fairly broad-based across industries in April, with moderate job gains in goods-producing sectors like construction & manufacturing after a weaker March. Strong jobs growth in services keeps chugging along.

Growth in average hourly earnings rose in April, rising to 4.4 percent on a year-over-year basis. On a month-over-month annualized basis, wage growth accelerated quite a bit. We shouldn't read too much into one month but this bolsters Fed's position that job market is still hot.

May is AAPI Heritage Month. In today's data, the Asian unemployment rate was flat at 2.8 percent and the Native Hawaiian & Pacific Islander unemployment rate (non-seasonally adjusted) rose to 3.4 percent. Both of these figures are low, consistent with the overall strength of the job market.

Because these are smaller groups, the survey sample does not contain many Asian or NHPI respondents, making the monthly data very volatile. Additionally, it is difficult to draw conclusions about specific subpopulations within the AAPI community on a monthly basis from this data.