Source: AFP
U.S. employment growth was well below analysts’ expectations in April, while unemployment rose, government data showed on Friday, signaling the labor market is cooling.
But with the world’s largest economy adding 175,000 jobs last month, hiring remained resilient despite a lower reading than March’s 315,000, the Labor Department said.
Analysts had expected growth of 250,000 jobs, according to Briefing.com.
The unemployment rate rose slightly from 3.8% in March to 3.9% last month.
While hiring has slowed, the number of jobs added in April remains well above 100,000 – the average level some economists say is needed to keep the unemployment rate steady.
For now, the latest data could prove encouraging to policymakers looking to gradually cool the economy.
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In addition to easing hiring, officials also expect a slowdown in wage gains as they seek to lower inflation over the long term.
In April, wage growth came in at 0.2 percent — up from 0.3 percent in March — on a monthly basis, according to the Labor Department.
From a year ago, average hourly earnings were 3.9 percent higher in April — falling below 4.0 percent for the first time since 2021.
Rising pressure
A stable labor market has helped support consumption and economic growth despite higher interest rates, which typically make borrowing more expensive for households and businesses.
The situation allowed Federal Reserve Chairman Jerome Powell to push back this week against talk of stagflation — a scenario that includes slow growth, high unemployment and elevated inflation.
At a press conference on Wednesday, he told reporters: “I don’t see the ‘stag’ or the ‘bloat.’
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However, he argued that the central bank is ready to respond to an unexpected weakening in the labor market.
For now, the US central bank has kept its key lending rate at a 23-year high, most recently citing a lack of further progress in reducing inflation.
Current readings “support the view that rate cuts — rather than hikes — are the key scenario for the Fed this year,” economist Rubeela Farooqi of High Frequency Economics said in a note.
“The underlying economic story here, we believe, is that businesses — especially small, bank-dependent businesses — are finally feeling the squeeze from sustained high real interest rates,” Pantheon Macroeconomics added in a recent report.
This comes as cash accumulated during the pandemic has been drained and “floating rate debt has become much more expensive,” Pantheon said.
Source: AFP