The U.S. economy added 428,000 jobs in April, with the unemployment rate holding steady at a pandemic low of 3.6%, the Labor Department announced Friday.
The report reveals a labor market that continues to expand with impressive vigor, adding 2.1 million jobs since the beginning of the year — and more than 400,000 jobs for 12 straight months, the strongest streak since 1939, according to Morgan Stanley. Demand for workers in the service sector in particular remains strong, with a gain of 340,000 jobs during the month.
The economy has now regained nearly 95% of the 22 million jobs lost during the pandemic. One area of concern, though, is labor force participation. The labor force shrank by 363,000 during the month, and although that number is not statistically significant, it does contribute to worries about the number of workers who remain on the sidelines despite solid wage growth.
Plenty of economists think the decline in the labor force participation rate, which fell two-tenths of a point to 62.2%, will prove to be temporary. The rate “has been trending strongly in the right direction for months,” said Elise Gould of the Economic Policy Institute, adding that she is “optimistic this will simply be a blip on the way to a full recovery in [the employment-to-population ratio] by the end of 2022.”
Other analysts aren’t so sure. Bloomberg’s Jonathan Levin argued Friday that the number of workers available to rejoin the labor force is getting smaller, and “the notion that a pool of untapped labor could somehow resolve the U.S.’s massive labor supply-demand imbalance was increasingly looking like wishful thinking.”
Wage gains slow: Wages grew by 0.3% during April, and by a very robust 5.5% over the last year, but the three-month moving average dropped from 5.2% in March to 4.4% in April — easing concerns about the development of a wage-price spiral that could make inflation harder to combat.
“Wage growth was a little bit slower than I expected – that could conceivably be a sign of positive things to come on inflation,” said former Treasury Secretary Larry Summers, a prominent inflation hawk. “The Fed’s moving in the right direction,” Summers added, referring to the central bank’s decision earlier this week to step up its effort to tighten monetary conditions. “Whether they’re moving strongly enough and whether it’s going to be enough to bring inflation durably under control I think is still very much in question.
EPI’s Gould said there’s little evidence of a wage-price spiral. “On a quarterly or monthly basis, nominal wage growth is actually falling even in the face of continued inflation,” she wrote. “We can keep labor markets tight without feeding inflation.”
How long can it last? The continued strength of the labor market has surprised some experts, and many assume that hiring will ease up in the coming months. “We expect that as the economy evolves, both growth and monthly hiring will slow to more familiar long-term trends of around 2% growth for the economy and increases of 200,000 in hiring,” Joseph Brusuelas, chief economist at the consulting firm RSM, said in a note Friday.
Oren Klachkin of Oxford Economics said that while hiring may slow, the job market will remain “a key source of resilience for the economy” for months to come. “Job creation will eventually settle into a slower pace as businesses feel the pinch of soaring inflation and tighter financial conditions, but gains will stay healthy,” Klachkin said. “We think the economy has enough strength to create over 4 million jobs this year.”