The US economy added 428,000 jobs in April, hotly-anticipated data out Friday showed.
That was more than the 380,000 consensus expected (figure below). The range of estimates from more than six-dozen economists was 250,000 to 517,000.
Although April marked the slowest pace of job creation since September, the headline print wasn’t indicative of a proper slowdown, and should help allay fears of a looming recession.
Revisions subtracted 36,000 and 3,000 from the February and March headlines, respectively.
Employment in the key leisure and hospitality sector increased by 78,000 in April, which I’d be inclined to call disappointing, although I’ll confess that’s a subjective assessment.
Food services and drinking places added 44,000 positions, accommodation 22,000. Leisure and hospitality hiring was revised lower for both February and March.
The three-month average pace is now on the verge of falling below 100,000 (figure above).
Employment in the sector remains down by 1.4 million, or 8.5%, versus pre-pandemic levels (figure below).
At the current rate, it’d take more than a year to recoup the remainder of the leisure and hospitality jobs lost to the pandemic. Given the likelihood of a recession at some point in the next 24 months, it’s possible all of those jobs won’t be recovered this cycle.
Friday’s data came on the heels of an ADP report which suggested small businesses shed jobs at an alarming rate last month, as smaller employers struggle to keep up with rising labor costs. Employment subindexes for both ISM surveys were underwhelming, with the services gauge dipping into contraction territory.
Private hiring was 406,000 last month, Friday’s labor market report showed. That was ahead of estimates.
Average hourly earnings increased 0.3% MoM and 5.5% YoY. The monthly print was cooler than expected, and the 12-month reading merely in line. That’s good news to the extent it’s incremental evidence of a peak in various gauges of inflationary pressures, but it needs to be coupled with falling consumer prices, or else it just translates to an even larger inflaton-adjusted pay cut.
Crucial data out a week ago showed employment costs rose at the briskest pace on record in the first quarter, while figures released on Thursday showed the sharpest four-quarter increase in unit labor costs in 40 years, as productivity plunged. Both reports fanned wage-price spiral fears, deepening market concerns about an aggressive Fed response, even as negative real wage growth casts doubt on the assumption that consumer spending will continue to anchor the world’s largest economy.
JOLTS data out Tuesday showed job openings unexpectedly rose in March, while quits hit a new record. There are nearly two job openings for every American counted as unemployed, a statistic Jerome Powell cited repeatedly this week during his post-FOMC meeting press conference.
Friday’s data showed the unemployment rate was unchanged at 3.6%. Participation ticked lower to 62.2%, which isn’t the best news. Economists expected another slight uptick. You might suggest that bodes ill for the Fed on at least two fronts. The US needs more workers, not less. Additionally, the market generally expects Powell to deliver a cumulative ~250bps of tightening in 2022 — 10 times more than the 25bps embedded in April’s data.
I’d note that the household survey showed a 353,000 decline (figure below).
It was the first drop since April of 2020.
Ultimately, April’s jobs report left the case for rate hikes unchanged. It had the potential to heighten growth concerns at a time when recession calls are growing louder by the day, but the strong headline wasn’t conducive to any dour prognostications.
Employment is a coincident to lagging indicator in the economic cycle. I am not in the camp that expects a recession soon, but one cannot rule one out by the end of this year. It seems, the twin shocks of pandemic and war have accelerated the economic cycle in both directions.