On Friday, the Labor Department reported that 211,000 jobs were added to the U.S. economy in April, while the unemployment rate fell to 4.4 percent. The report beat analyst expectations—economists surveyed by The Wall Street Journal were expecting only 188,000 jobs—which was a welcome relief after a miss in March. Here are the three most important takeaways.
- The U.S. labor market is near full employment.
The unemployment rate has been at or under 5 percent for 18 months running, and this month’s reading is a 10-year low. The nagging question for economists in the past year has been whether the economy is at full employment after months of steady growth. The dispute is in the details: The topline numbers have been stellar, with a healthy number of jobs being added monthly and the unemployment rate falling to record lows. Labor-force participation has also stopped declining, and is holding steady at 62.9 percent.
But where economists would like to see more improvement is in wages. In April, average hourly earnings were up to $26.19—which brings the overall wage growth in the past 12 months to 2.5 percent. That’s not bad, but the growth rate for wages hasn’t been accelerating, which gives some analysts pause. A strengthening labor market should theoretically produce better pay for many American workers, and allow for those who dropped out of the workforce during the recession to return to the labor market due to the increase in jobs and pay.
- April’s report is a bounce back from March.
The disappointing March jobs report wasn’t a total surprise, partly because there was a snowstorm in the Northeast and Midwest during the week that the BLS does its survey, which kept some workers at home. Additionally, the “retail apocalypse” of announced store closings meant that more jobs than normal left the economy during the month. This month, the disappointing March number was revised down from 98,000 to 79,000. But the April jobs report provides a bounce back in part because of warmer weather and fewer layoffs. The Labor Department reported gains in hospitality, mining, healthcare, and finance. Including the revisions for the February and March reports, an average of 174,000 jobs were added per month over the last three months.
- An interest-rate hike in June now looks more likely.
In the past, the Fed has indicated that sustained growth in the U.S. labor market is one of the factors it considers when deciding interest rates. The strong April jobs report could theoretically strengthen a case for a June rate hike, although at its most recent Federal Open Market Committee (FOMC) meeting, the Fed decided to hold steady because of concerns over the slow pace of economic growth in the first quarter of 2017. In a statement following the decision, the Fed committee indicated that they believe slowdown in growth would be temporary.
April’s jobs report lands ahead of a busy day of Fed speeches, all of which will be closely watched for signals regarding the June FOMC meeting: Chairwoman Janet Yellen will be speaking at Brown University this afternoon; San Francisco Fed President John Williams is speaking in New York; and three Fed presidents are participating at a panel at Stanford’s Hoover Institute. The Fed has been cautious with rate increases thus far, but if inflation creeps higher and more jobs reports mirror April’s performance, hikes could be on the table soon.