The figures: The United States added a solid 428,000 new jobs in April, but severe labor shortages showed little improvement last month and threaten to add to the highest inflation in 40 years.
Economists polled by The Wall Street Journal predicted 400,000 new jobs.
The unemployment rate is unchanged at 3.6%, the government said on Friday, just a few points above the 54-year low.
Meanwhile, the workforce shrank in April for the first time in seven months, signaling how difficult it is for companies to find workers.
As a result, the so-called labor market participation rate fell to 62.2% from 62.4%, leaving it more than a full percentage point below pre-pandemic levels.
The April employment report will not affect the Federal Reserve’s plan to raise interest rates sharply this year. The central bank raised interest rates on Wednesday for the second time since March as part of efforts to contain the worst inflation outbreak in the United States since the early 1980s.
Although one of the Fed’s two mandates is to promote a strong job market, the bank worries that persistent labor shortages will increase wages too much and contribute to intense inflationary pressures that are already pushing the economy.
A record number of job vacancies in the United States are not filling up very quickly due to a large labor shortage.
Stephanie Reynolds / Agence France-Presse / Getty Images
The cost of living has jumped 8.5% in the last year, the largest increase since 1982.
Wages are also rising fast, but not so fast. Hourly wages rose sharply again in April, putting the increase in the last 12 months at 5.5% – also the biggest profit since the early 1980s.
Background: The narrowest labor market in decades is a double-edged sword.
Although higher wages have not played a major role in the rise in US inflation over the past year, the Fed fears that rising labor costs could increase price pressures.
By raising interest rates to cool the hot economy, the Fed aims to limit increases in both material costs and labor costs.
It can be a difficult pill for workers to swallow. Raising wages is helping them cope with high inflation, and a slower economy could weaken a strong labor market.
Key details: Employment rose last month in each major category.
The largest increase in jobs has again occurred in service-oriented companies such as restaurants and hotels. They added 78,000 workers.
Employment has also increased by 55,000 among manufacturers and 52,000 among transport companies.
The number of new jobs created in March and February has not changed much.
The reduction in the workforce is the only noticeable negative in the job report, an economist said. Approximately 363,000 have stopped working or are looking for work.
However, the size of the workforce has grown significantly in the last year amid a record number of job vacancies and a gradually declining pandemic.
The United States has only 1.2 million jobs below its peak before the coronavirus, a number the economy is likely to surpass by July at current hiring rates.
Economists are closely monitoring whether rising wages are beginning to contribute significantly to inflationary pressures.
The last time the so-called wage and price spiral occurred was in the 1970s and early 1980s, when the United States was experiencing one of the worst bouts of inflation in its history.
Looking ahead: “The labor market continues to move forward, supported by strong demand from employers,” said Daniel Zhao, senior economist at Glassdoor. “However, the labor market is showing some signs of cooling, as it is turning a corner and the recovery is entering a new phase.
“American companies are still looking forward to work despite all the uncertainty about inflation, interest rates, the war in Ukraine and the blockade in China,” said senior economist Sal Gauthieri of BMO Capital Markets. “However, job growth will slow along with the economy as the Fed raises interest rates to try to control inflation.
Market reaction: Dow Jones Industrial Average DJIA, -1.24% and S&P 500 SPX, -1.36% had to open lower in Friday’s deals.
Shares have been spinning wildly over the past two days as investors try to figure out if the US economy is stable enough to withstand the rapid rise in Federal Reserve interest rates.
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