April’s Employment Slowdown

Key employment figures for the month of April were recently released and showed a weaker than expected performance and a marked slowdown compared to previous months. In this sense, nonfarm payrolls posted 175,000 jobs last month, down from the average of 269,000 jobs during the previous three months, and implied the lowest gain since October of last year.

Breaking down the data, the public sector was the main driver of this decline in reported job growth for April, as only 8,000 government jobs were added, compared to an average pace of 60,000 over the previous six months. For its part, the private sector continued to add jobs at a solid pace in April (+153,000), with the health care and social assistance sector accounting for more than half of these jobs (87,000).

As another sign of subdued labor demand, it is noted that the average workweek fell to 34.3 hours, and the unemployment rate rebounded slightly from 3.8% in March to 3.9% last month. Finally, average hourly wages increased by only 0.2% in the month, and with downward revisions from the previous month. Against this backdrop, annual wage growth declined to 3.9% from last year’s average of 4.4%. While all of these figures were less robust than in previous months, overall, they still reflect a healthy labor market environment.

That said, April’s employment figures, together with the first estimate of the 1Q24 GDP, which experienced an annualized growth of 1.6%, down from the 2.4% expected and 3.4% in the 4Q23, would be reinforcing the idea that the economy is heading towards a “soft landing”, the central scenario proposed for this year.

Regarding the potential implications of monetary policy, from the possible implications of monetary policy, it will be important to observe whether the next employment reports maintain this cooling trend. However, we do not rule out that FED officials have interpreted these figures positively, seeing them as a welcome sign that the labor market continues to reach a better balance and that monetary policy is tight enough. Next week will be crucial, as inflation for the month of April will be released. A slight expected decline to 3.7% annually  (excluding the volatile energy and food components) is expected. So far, consensus broadly indicates that the federal funds rate will remain in the 5.25% to 5.50% range for the next meeting on June 12.  

Nonfarm payrolls evolution 

  • Monthly change, figures in thousands. 

Source: JP Morgan

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