The April Jobs report came in stronger than expected and revealed a resilient labor market that is still dodging expectations for a downturn. Notably, large downward revisions took a combined 149K payrolls out of the February and March figures, adding a layer of softness to the report. However, solid job growth, lower unemployment and a move higher in wage growth underpin continued resilience in the jobs market.
Among the highlights:
• Nonfarm payrolls grew by 253,000, well above the consensus expectation of 185K, with gains strongest in professional business services, healthcare and leisure/hospitality.

• The household survey, which counts people as opposed to business payrolls, showed a softer increase in employment of 139,000.

• Wage growth for all workers was hot, rising 0.5% m/m and bringing the y/y rate up to 4.4%.

• The unemployment rate dropped back to its historic low of 3.4% but the size of the labor force also shrunk slightly by 43,000 workers.

• Despite the climb in layoff announcements and unemployment claims, the number of unemployed people for less than five weeks actually fell, suggesting excess labor market demand has been enough to absorb those workers so far.

• Overall, not only does this report tell us the economy was not in recession in the first quarter, it also suggests it may well dodge one in the second. For a data-dependent Fed, this report may raise concerns about continued tightness and reduces the odds that the Fed will soon cut rates. However, the labor market is usually the last to break in an economic downturn, and when it does, things can change quite rapidly. The broader signals pointing to labor weakness, i.e., tightening business conditions, weak sentiment and declining job openings, will likely flow through to the aggregate labor data in the coming months. The labor market can’t dodge a downturn indefinitely.

• Still, the real concern in the economy right now is not the labor market, but the tightening in business conditions from the fallout of the regional banking crisis. We continue to see concern for an economic slowdown in the second half of the year, which should at least keep the Fed on pause and likely will even warrant a pivot to rate cuts later in the year. 

David Kelly is chief global strategist at JPMorgan Funds. Stephanie Aliaga is a research analyst at JPMorgan Funds.