U.S. employers slowed hiring in April and the unemployment rate rose unexpectedly, suggesting some cooling is underway in the labor market after a strong start to the year.
Nonfarm payrolls rose by 175,000 last month, the smallest increase in six months, a Bureau of Labor Statistics report showed Friday. The unemployment rate rose to 3.9% and wage increases slowed.
Friday's report showed more evidence that the demand for workers is moderating, But the data likely does not represent “an unexpected weakening” that Federal Reserve Chair Jerome Powell said would justify a policy response.
After holding interest rates steady for the sixth consecutive meeting this week, Powell said he believes policy is restrictive as seen in lower demand for labor, although it still exceeds the supply of available workers. As inflation has largely retreated from its 2022 peak, officials are now also focused on ensuring maximum employment, he said Wednesday. Treasury yields and the dollar fell, while stock futures rose after the report.
The employment report It follows a series of posts earlier in the week that suggested wage pressures continue to press on even as demand for workers cools somewhat. Data on Friday showed average hourly earnings rose 0.2% from March and 3.9% from a year earlier, the slowest pace since June 2021.
Some economists expected a stronger increase in part because of a new California law requiring a US$20 minimum wage for fast food workerswhich came into effect on April 1.
Job growth slowed in the leisure and hospitality, construction and government sectors. Payrolls declined at automakers and temporary help providers. Gains were concentrated in healthcare, transportation and retail.
The very gradual cooling of hiring and wage growth is part of the reason policymakers have indicated they are in no rush to lower interest rates from a two-decade high. Powell has also welcomed an increase in the supply of workers, driven in particular by an influx of immigrants.
The participation rate (the proportion of the population working or looking for work) remained stable at 62.7%. The rate for workers ages 25 to 54 rose to 83.5%, matching the highest level in two decades. Greater participation will help slow wage growth.
