U.S. employers hired at a robust pace in April, yet more tempered wage growth and a smaller labor force offered mixed signs for a Federal Reserve that’s aggressively raising interest rates to curb hot inflation.
The 428,000 gain in nonfarm payrolls matched the advance in March and was broad-based across industries, a Labor Department report showed Friday. The unemployment rate held at 3.6% and average hourly earnings rose, albeit at a more moderate pace from a month earlier.
The median estimate in a Bloomberg survey of economists called for a 380,000 advance in payrolls and for the unemployment rate to fall to 3.5%.
The S&P 500 opened lower, 10-year Treasury yields rose and the dollar fluctuated.
The solid payrolls advance suggests demand for labor remains strong. Job openings and quits are back at record highs, and businesses are scrambling to hire enough workers to keep up with resilient consumer demand.
The extreme competition for workers has driven up wages at a rapid pace in recent months, and the drop in participation suggests employers will have to do even more to lure workers back. Even so, many workers have not seen their incomes keep up with inflation.
Friday’s report showed that average hourly earnings rose 0.3% from March after an upward revision to the prior month. Earnings were up 5.5% from a year earlier. It’s hard to tell if this is the start of a sustained moderation in wage growth or a temporary break in the pace of rampant gains.
The former would be good news for the Fed as it seeks to subdue the fastest inflation in four decades. Chair Jerome Powell said Wednesday that the central bank hopes to temper demand for workers, with the aim to slow wage growth and inflation “without having to slow the economy and have a recession and have unemployment rise materially.”
Policy makers this week raised interest rates by the most since 2000 in an effort to combat rising prices, and Powell said hikes of such size are on the table for upcoming meetings as well.
“The data confirm the Fed’s view that the labor market remains resilient and has strong positive momentum,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said in a note. “However, wage pressures are in focus and elevated gains are indicating ongoing competition for still-scarce labor, which is lifting labor costs.”
The labor force participation rate -- the share of the population that is working or looking for work -- fell to 62.2%, the lowest in three months, and the rate for workers ages 25-54 edged lower. That makes the Fed’s job more complicated in trying to bring labor demand in line with supply.