![U.S. job growth reached 175,000 in April, far less than expected, while unemployment rose to 3.9%.](https://image.cnbcfm.com/api/v1/image/107410033-17147399981714739993-34373973215-1080pnbcnews.jpg?v=1714739997&w=750&h=422&vtcrop=y)
The U.S. economy created fewer jobs than expected in April while the unemployment rate rose, raising hopes that the Federal Reserve will be able to cut interest rates in the coming months.
Nonfarm payrolls rose 175,000 for the month, below the Dow Jones consensus estimate of 240,000, according to the Labor Department's Bureau of Labor Statistics. reported Friday. The unemployment rate increased to 3.9% while it was hoped it would remain at 3.8%.
The average hourly wage rose 0.2% from the previous month and 3.9% from a year ago, both lower than consensus estimates and an encouraging sign for inflation.
The unemployment rate is tied for the highest level since January 2022. A broader rate including discouraged workers and those in part-time employment for economic reasons also increased slightly, to 7.4%, its highest level. high since November 2021. The activity rate, or those actively looking for work, remained unchanged at 62.7%.
Wall Street was already set for a higher open and futures were tied to major stock market averages. added to earnings following the report. Treasury yields fell after being little changed before the release. The report raises the prospect of a “Goldilocks” climate, in which growth continues, but not at such a rapid pace as to force the Fed to tighten policy further.
“With this report, the porridge was about right,” said Dan North, senior economist at Allianz Trade. “What would you like at this point in the cycle? We've seen interest rates rise quite high, so you would expect to see the labor market slow down a little bit. But we're still at pretty high levels.”
Consistent with recent trends, health care led job creation, with an increase of 56,000.
Other sectors showing significant increases include social assistance (31,000), transportation and warehousing (22,000) and retail (20,000). Construction added 9,000 positions while government, which had posted strong gains in recent months, increased by only 8,000 after an average of 55,000 over the previous 12 months.
Revisions from previous months brought March's gain to 315,000, up 12,000 from the original estimate, and February's gain to 236,000, a decline of 34,000.
Household employment, which is used to calculate the unemployment rate, increased by only 25,000 over the month. Workers in full-time jobs rose by 949,000 for the month, while those in part-time jobs fell by 914,000.
The report comes two days after the Fed again voted to maintain borrowing costs, keeping its benchmark overnight borrowing rate in a range between 5.25% and 5.5%. the highest in more than 20 years.
Following the decision, the president Jerome Powell called the labor market “strong” but noted that inflation is “too high” and that economic data this year indicated “a lack of further progress” in bringing inflation back to target by 2% of the Fed.
But market action changed after the jobs report indicated a slowing labor market and more moderate wage increases. Traders anticipated a high likelihood of two interest rate cuts by the end of 2024, with the first cut expected in September, according to CME Group data.
“This is the jobs report that the Fed would have prepared,” said Seema Shah, chief global strategist at Principal Asset Management. “The first surprise wage cut in several months, along with the decline in average hourly wage growth, will bring the rate-cutting dialogue back to the market and perhaps explain why Powell was able to be dovish on Wednesday.”
Even though inflation is far from its mid-2022 peaks, it remains well above the central bank's comfort zone. Most reports this year have shown inflation around 3% per year; The Fed's preferred measure, the core personal consumption expenditures price index, was most recently at 2.8%.
Rising prices have put upward pressure on wages, amid an inflationary backdrop that has kept the Fed on the sidelines despite widespread market expectations that the central bank would aggressively cut interest rates. interest this year.
Most Fed officials have in fact raised the likelihood of a reduction in their public comments. However, during his post-meeting press conference on Wednesday, Powell made no mention of the likelihood that rates would be lowered at some point this year, as he has done in the past.