The Job Market Slows But Defies Expectations Yet Again

The Job Market Slows But Defies Expectations Yet Again

The U.S. labor market has now beaten expectations for over a year. 

U.S. employers added 253K jobs in April (over 100K more than needed to keep up with population growth). The economy even eked out gains in interest-rate sensitive industries, like capital-intensive manufacturing and construction; in financial services despite recent banking turmoil and last year’s deep stock market losses; and in retail, despite recent declines in retail spending. 

The April report does mark a significant slowdown in the pace of jobs added, especially factoring in downward revisions for the prior two months. Recent gains in leisure and hospitality now seem to have been overstated. Nevertheless, job growth remains remarkably resilient, over a year after the Federal Reserve began raising interest rates.

Job gains would likely have been higher were the job market not so supply-constrained. 

The unemployment rate ticked back down to 3.4%. It has now been below 4% for well over a year—a marker of a very tight labor market. In recent months, labor force participation has recovered rapidly, but it was flat in April, holding back hiring. With relatively few people coming in off the sidelines, new jobs went to those actively seeking employment. As a result, Black and Hispanic unemployment continued to fall, with Black unemployment hitting a new all-time low of 4.7%.

The prime-age employment-population ratio continued to rise and is now at the highest rate since 2001, at 80.8%. The steady upward trend before the pandemic, and its recent recovery, suggest that there isn’t a ceiling on prime-age employment rates, but rather just a speed limit on how quickly people can be added to the workforce. If we avoid a recession in the coming months and continue adding jobs, it seems possible that we could return to the all-time highs of over 81% reached in 2000.