Topline
Despite major employers continuing to cut jobs, the Labor Department’s jobs report on Friday showed an unexpected rebound in employment—coming in well above economist projections as the Federal Reserve gauges whether the economy is cooling enough to officially end its aggressive rate-hiking campaign.
Key Facts
Total employment increased by 253,000 in April—far exceeding economist expectations of 180,000 after growth in March marked the lowest monthly gain since December 2020, according to data released Friday by the Labor Department.
The unemployment rate, meanwhile, ticked down to 3.4% from 3.5% in March—matching a 54-year low hit in January and defying projections it would tick up to 3.6%.
Wage growth also came in stronger than forecast, coming in at 4.4% year over year, versus projections of 4.2%, as hourly earnings rose 16 cents to $33.36.
Not everything was positive: The Labor Department also revised data for the two prior months to show there were 149,000 fewer jobs added than previously believed in February and March.
Key Background
Amid waves of layoffs hitting some of the nation’s largest tech employers, the unemployment rate has ticked up from a 54-year low of 3.4% in January but remained near historically low levels. Layoffs, however, have since spread to other industries, with manufacturing giant 3M and Vice Media among those cutting thousands of jobs last month. On Thursday, outplacement firm Challenger, Gray & Christmas reported employers have cut roughly 337,000 jobs so far this year—a 322% jump from the same period in 2022. In a statement, the firm’s Andrew Challenger noted retailers and consumer goods manufacturers, in particular, are preparing for tightening in consumer spending, as the Fed hikes interest rates (which tend to slow the economy) in an attempt to control inflation.
Tangent
The Fed continued its aggressive rate-hiking campaign on Wednesday, raising interest rates by another 25 basis points to a top level of 5.25%—the highest since September 2007. Justifying the added pressure, officials noted job gains have been “robust in recent months,” while the unemployment rate has remained low. “The Fed’s hope is to architect a soft landing, such that tighter monetary policy will reduce job openings without big increases in unemployment,” says First American economist Odeta Kushi. “That possibility is still on the table.” EY forecasts the rates could push the unemployment rate up to 4.5% by year’s end—reflecting some 1.5 million lost jobs.
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