The economy added 175,000 jobs in April, versus 315,000 the month before, and the unemployment rate rose a tenth of a percentage point to 3.9%, the Bureau of Labor Statistics reported on Friday.
Investors had expected roughly 300,000 new jobs and for the unemployment rate to hold steady at 3.8%.
The interpretation
“It’s a little disappointing, obviously, but it’s still a strong number, and this is kind of what you would expect as the economy eases down a little bit after we’ve had such a long string of interest rate hikes,” Dan North, a senior economist with Allianz Trade Americas, told the Washington Examiner. “A little weaker on the headline, but still OK.”
What it means … for Biden
The report is unwelcome news for President Joe Biden, who is suffering from high disapproval ratings related to his handling of the economy. Biden is running low on time to turn around voter perceptions of his handling of the economy before the election.
While the economy is still adding jobs, the number was well short of expectations and a major slowdown from the months before.
What it means for … the Fed
Friday’s report shows some cooling in the labor market. If subsequent reports indicate that employment growth is slowing, that would push up the timing of a cut in the Federal Reserve’s interest rate target.
The underlying reality
It is important not to read too much into any one jobs report. The payroll numbers bounce around from month to month and are revised in subsequent reports.
Instead, it is helpful to look at the trend. The three-month moving average of jobs decreased to 242,000.
Roughly 110,000 new payroll jobs are needed each month to keep unemployment from rising, according to the Federal Reserve Bank of Atlanta. Note, though, that a separate estimate that takes into account the full extent of recent immigration puts the number as high as 200,000.
Prime-age employment, relative to the overall population, is strong by historical standards.
Recession watch
The unemployment rate, taken from the jobs report’s household survey, is low.
Recessions entail a rising unemployment rate.
Friday’s data suggest that the United States is close to but still short of triggering one major recession indicator — namely, when the three-month moving average of the unemployment rate rises half a percentage point relative to its minimum point over the past year. This indicator, known as the Sahm Rule, signaled the start of all postwar recessions.
Industries to watch
The leisure and hospitality sector is just below the levels of employment it reached in February 2020, right before restaurants and bars were forced to shut down across the country.
Construction employment has remained robust, even as the housing market has taken a massive hit over the past few years as mortgage rates have soared alongside the Fed’s rate hikes. That’s in part because of a huge backlog of construction of multifamily housing over recent months. Economists will watch closely for any sign of slowing hiring in construction.
Unemployment rates by race/ethnicity
The household survey also includes unemployment rates by race and ethnicity. Rates for all groups neared record lows in the past few years but appear to have drifted up recently.
