Following the release of the jobs report, stock prices surged and bond yields dropped on Friday, fuelled by hopes that rate cuts might now be more likely in the coming months
US employers have scaled back on hiring in April, but still added 175,000 jobs, a signt that the high interest rates may be starting to impact the robust US job market, according to a report from Washington.
The government’s Friday report revealed that last month’s hiring gain was significantly lower than March’s increase of 315,000. It also fell short of the predicted 233,000 gain economists had forecasted for April. However, the Federal Reserve is likely to welcome this slowdown in hiring and wage growth, as it has been maintaining interest rates at a two-decade high to combat persistent inflation.
Hourly wages saw a less-than-expected rise of 0.2% from March and 3.9% from a year earlier, marking the smallest annual gain since June 2021. The Fed has been holding off on any consideration of interest rate cuts until it gains more confidence that inflation is steadily slowing towards its 2% target.
Over time, rate cuts by the central bank would reduce the cost of mortgages, loans, and other consumer and business borrowing. Following the release of the jobs report, stock prices surged and bond yields dropped on Friday, fuelled by hopes that rate cuts might now be more likely in the coming months.
Rubeela Farooqi, chief US economist at High Frequency Economics, said: “A slowdown in payrolls to a decent pace to start the second quarter, coupled with a slowing in wage gains, will be welcome news to (the Fed’s) policymakers,” she said. “Current readings also support the view that rates cuts and not hikes are the base case scenario for the Fed this year.”
The state of the economy is a major concern for voters as the November presidential campaign heats up. Many Americans are frustrated by high prices, with a significant number blaming President Joe Biden.
Despite the hiring slowdown in April, last month saw a substantial increase in job growth, albeit the lowest monthly gain since October. With households maintaining steady spending, many employers have had to continue recruiting to meet customer demand.
Although the unemployment rate rose slightly from 3.8% to 3.9% in April, it marked the 27th consecutive month that the rate has stayed below 4%, equalling the longest such streak since the 1960s. Michael Pugliese, senior economist at Wells Fargo, described the report as “Certainly a cooler jobs report than we’ve seen,” but added, “But it’s not like it was disastrous: 175,000 is still pretty strong, and unemployment below 4% is still pretty healthy.”
He anticipates that hiring, which averaged a robust 242,000 from February through April, will continue to slow down.Last month, the hiring was spearheaded by healthcare companies, which added 56,000 jobs. Warehouse and transportation firms contributed 22,000, while retailers added 20,000.
Government at all levels added 8,000 jobs in April, marking the lowest monthly total since December 2022. Local governments didn’t contribute any new jobs last month. Paul Ashworth of Capital Economics highlighted that state and local government revenue has recently taken a hit.
Temporary help positions saw a decline of over 16,000. These roles are often viewed as a potential indicator of the job market’s direction, as companies sometimes trial temps before committing to full-time hires. The percentage of the adult population either employed or seeking employment remained stagnant at 62.7%, significantly below pre-pandemic levels.
America’s job market has consistently outperformed almost all predictions. When the Fed started aggressively increasing rates two years ago to combat severe inflation, most economists anticipated the subsequent rise in borrowing costs would trigger a recession and push unemployment to distressingly high levels.
