The US economy added 253,000 jobs in April, according to scorching-hot figures released on Friday.
That easily exceeded consensus. Economists expected 185,000 from the headline NFP print. The range of estimates from more than six-dozen forecasters was 125,000 to 270,000.
Sizable negative revisions, split almost evenly between February and March, did temper an otherwise blazing report. Payroll additions for those two months are now a combined 149,000 lower.
Private payrolls rose 230,000, nearly doubling consensus and matching the highest estimate. That was generally consistent with a very robust ADP print for April. The household survey showed a 139,00 gain.
Notably, leisure and hospitality added just 31,000 jobs, 25,000 of which were in restaurants and bars. That was less than half the average monthly gain seen over the past six months. Manufacturing added 11,000 positions, in defiance of a purported factory slump.
The average hourly earnings figures were unfavorable for a Fed keen to see evidence of moderating wage growth. Jerome Powell has suggested that wages may cool in lockstep with a decline in job openings, but Friday’s figures suggested otherwise.
Hourly earnings rose 0.5% MoM in April, a big beat to consensus (0.3%). On an unrounded basis, it was the briskest monthly pace of wage growth in more than a year.
One a YoY basis, AHE rose a hotter-than-expected 4.4%, a full percentage point higher than levels seen as consistent with 2% consumer price growth.
When considered with the above-consensus read on Q1 ECI and Thursday’s update on unit labor costs+, the wage-price spiral narrative is intact, although the JOLTS report did nod to more progress towards normalization.
The unemployment rate moved down to 3.4%, which we can just call the lowest in modern American history. It was lower in the early 50s.
The participation rate didn’t move. It’s at post-pandemic highs and is generally back to the pre-COVID demographic trend.
This report, notwithstanding the revisions to February and March, didn’t suggest that sticky services sector inflation is likely to abate anytime soon. In fact, it suggested just the opposite of that.
Unfortunately, Friday’s figures were a second “that didn’t age well” moment for Powell. During Wednesday’s press conference, he said the banking system had stabilized, only for Bloomberg to report that PacWest was exploring options (including a sale) two hours later. Then, Friday’s AHE print made any allusions to cooler wage growth seem misguided.
All in all, April’s jobs report nodded in the direction of a longer fight to corral inflation. At the least, it was a “higher for longer” report. The Fed isn’t going to reverse this week’s rate hike in June, and the odds of a cut in July are markedly lower than what traders are pricing. If CPI comes in hot for April, and the bank drama persists, the Fed is going to have a very vexing dilemma on its hands.
It’s a good thing that credibility isn’t something most Americans care about these days.