US job market shows signs of cooling, with just 175,000 jobs added in April

Not so fast, my friend.

Following revisions to recent months' employment estimates, the key consumer-facing industry is back to being just shy of pre-pandemic form. As of April, there were an estimated 16.897 million leisure and hospitality workers versus 16.899 million in February 2020, according to Bureau of Labor Statistics data.

The overall revisions seen in April were comparatively mild to those seen in the past. February's and March's estimated gains were revised down by a combined 22,000 jobs. February's estimates dropped by 34,000 to 236,000 net jobs added, while March's strong job gains of 303,000 were revised up by 12,000 to 315,000.

The labor force participation rate for women between the ages of 25 and 54 climbed 0.3 percentage points to 78% last month, Bureau of Labor Statistics data shows.

Prior to the pandemic, women’s labor force participation rates rose faster than their male counterparts as female-dominated industries such as health care and caregiving saw rapid growth; educational attainment for women rose substantially; and there were greater inroads by women into traditionally male-dominated fields such as construction, agriculture, and maintenance.

Since the pandemic, other developments helped serve as further drivers: increased work flexibility and strong job gains in female-dominated industries such as health care.

Bill Adams, chief economist for Comerica Bank, said better labor force participation was one of the main reasons why the overall unemployment rate ticked higher in April to 3.9%.

"The employment-population ratio for workers ages 25-54 was near the highest since 2022 and for workers 16-24 was near the highest since 2008," Adams wrote in a note on Friday.

Still, the overall labor force participation rate (workers 16 and older) was unchanged at 62.7%, nearing its post-pandemic high. Labor force participation rates have been on the decline since 2000 due to demographic shifts (largely, aging Baby Boomers). The pandemic effects (early retirements, deaths, long-Covid, caregiving needs) have played a role as well.

When that rate rocketed higher, economists cautioned that it was likely (and hopefully) a statistical anomaly. The household survey that feeds into the jobs report is typically more volatile, so it was possible that sudden leap wasn't fully representative.

The return to 5.6% in April was reassuring, Elise Gould, senior economist for the Economic Policy Institute, told CNN in an interview.

"When things are going to get soft in the labor market, historically disadvantaged groups are often going to feel that first," she said. "It's still important to keep an eye on, but I think it's promising that it has dropped."

Since the pandemic started to ease, US employers have added hundreds of thousands of jobs each month. For instance, in 2022, employers added an average of nearly 400,000 jobs each month and in 2023, they added around 225,000.

So, compared to that, April's 175,000 gains may sound paltry. But it's certainly nothing to sneeze at, looking back in time.

Though it's slightly below the 183,000 average monthly gains in the decade before the pandemic, it's well above the 125,000 average gains from 1939 to 2019. It's also above 2019's average monthly gains of 166,000 jobs.

Chicago Federal Reserve President Austan Goolsbee views April's 175,000 job gains as "very solid."

It's a sign the economy is shifting back toward pre-Covid "conventional times," he said Friday in a Bloomberg TV interview.

"In a previous world, if you said you know you're getting jobs numbers in the 175,000 to 200,000 range, people would be quite happy with that," he said.

But jobs reports like April's are a positive development in that they give officials more confidence that the economy is not overheating, he added.

President Joe Biden acknowledged that America's job market remains strong, saying in a statement that "the great American comeback continues," even after the latest batch of employment figures came in below expectations.

"When I took office, I inherited an economy on the brink, with the worst economic crisis in a century," he said in a statement Friday.

"Now we are seeing that plan in action, with well over 15 million jobs created since I took office, working-age women employed at a record high rate, wages rising faster than prices, and unemployment below 4 percent for a record 27 months in a row."

Americans' paychecks grew at a slower pace last month, but wage growth remains strong and April's softer earnings figures could be viewed favorably by the Federal Reserve, which is still fighting inflation.

Private-sector workers earned $34.75 an hour in April, on average. That was up 7 cents from March, or 0.2%. From a year earlier, wages grew 3.9% in April, which was the weakest annual rate since May 2021. That's not particularly concerning because workers are still commanding historically strong wage gains — by a very comfortable margin, too.

Annual wage growth never rose above 3.6% from 2007 (the earliest available data) to the spring of 2020, when the Covid-19 pandemic distorted economic data. Wage gains still have a way to go before even returning to pre-pandemic levels — and they're still outpacing inflation.

But the steady slowdown over the past few years, since reaching a peak in March 2022, is generally seen as a good thing by the Fed. The central bank has been fighting inflation for about two years now and a tight labor market is seen by officials as a potential source of inflationary pressure. They want wage growth to "be consistent" with their inflation target of 2%, so cooling wage gains could help them tug inflation lower. Workers can still command robust wages — if productivity growth is at the very least keeping up. It remains to be seen if 2023's burst of productivity will persist. 

US stocks soared higher on Friday morning after new data showed that US job growth slowed considerably last month.

The Dow opened more than 530 points higher, the S&P was up 1.2% and the Nasdaq Composite gained 1.8%.

The US added just 175,000 new jobs in April, according to Bureau of Labor Statistics data released Friday. That's far below economists expectations for 235,000 jobs and the 315,000 jobs added in March. The unemployment rate ticked higher as well, to 3.9% from 3.8% the month before.

While that's bad news for Main Street, Wall Street celebrated the news.

That's because the Federal Reserve is working to slow the economy by hiking interest rates — the only tool it has to fight inflation. A still-robust job market means the central bank could continue to keep rates elevated without fear of sending the economy into a recession. If the labor market weakens, the Fed is more likely to consider a rate cut.

For the first time in a while, the latest US employment figures came in below economists' expectations. Job growth in April was sharply weaker than in the prior month and the unemployment rate edged higher, instead of holding steady as economists projected. The job market clearly slowed down this spring, but it remains robust.

Fed officials have said they want to see the job market come "into better balance" to help bring inflation lower. They got that with the April jobs report. But they're not necessarily popping champagne bottles, either.

For starters, this is just one month's data, so it remains to be seen whether this softening momentum will continue. Fed Chair Jerome Powell also said in his latest news conference — after the central bank held interest rates steady for the sixth-straight meeting — that policymakers would be concerned to see an "unexpected weakening in the labor market."

That means officials prefer to see a steady and orderly slowdown.

A string of unexpectedly weak labor data in the coming months could force officials to consider cutting rates sooner than expected, since the Fed is also mandated by Congress to maximize employment, in addition to stabilizing prices.

It's too soon to tell whether April was just noise or the start of a trend, but at least the Fed doesn't have worry about the job market heating back up.