According to the Labor Department’s closely watched employment report, U.S. employers boosted hiring in April while raising wages for workers, indicating sustained labor market strength that could see the Federal Reserve keeping interest rates higher for some time. Nonfarm payrolls increased by 253,000 jobs last month, exceeding economists’ expectations of 180,000. The unemployment rate fell to 3.4%, and average hourly earnings gained 0.5%, with wages increasing 4.4% on a year-on-year basis in April.
The Federal Reserve recently raised its benchmark overnight interest rate by another 25 basis points to the 5.00%-5.25% range and signaled that it may pause its monetary policy tightening campaign, although it kept a hawkish bias. However, some economists believe that the labor market is overstating the health of the economy, pointing to the divergence between consumer spending and job gains, as well as a continued decline in worker productivity.
Furthermore, job growth is becoming more concentrated in the leisure and hospitality industry as well as state and local governments, sectors where employment remains below pre-pandemic levels. With risks of a recession mounting due to punitive borrowing costs and tighter credit conditions amid financial market stress, the hiring landscape could change quickly.
Jim Perry, founder & CIO Perry International Capital Partners, LLC., pours over the April jobs report