3 things to know about the April 2018 jobs report
The U.S. added 164,000 jobs in April, notably lower than the 193,000-plus that economists were expecting. However, the overall employment picture looks strong, with the lowest unemployment rate since 2000 and April marking the 91st straight month of job gains.
Here are some highlights from the report.
1. Unemployment reached a historic low. The unemployment rate dipped to lows not seen since 2000. This is a good sign, though it may be a little deceptive.
According to The Washington Post: “For the past six months, the jobless rate had clung to 4.1 percent, the longest it had gone without budging since the late 1960s. (The record to beat: nine months.) The streak defied the expectations of economists, who said the nation’s prolonged hiring blitz was bound to drive the figure down.”
According to MarketWatch: “The unemployment rate, meanwhile, slipped to 3.9% after holding at 4.1% for six months in a row. Yet the decline owed to a shrinking labor force and fewer people saying they were unemployed instead of an increase in how many people found work.”
According to Reuters: “It was the first time in six months that the jobless rate dropped. But 236,000 people left the labor force in April. The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, fell to 62.8 percent last month from 62.9 percent in March.”
2. What about wages? Low unemployment is usually expected to lead to increased wages as the labor market tightens and employers are forced to compete more to attract fewer candidates. However, wages continued to grow slowly in April, despite the drop in the unemployment rate.
According to U.S. News & World Report: “Many employers say it’s difficult to find qualified workers. Even so, they haven’t significantly bumped up pay in most industries. Average hourly earnings rose 2.6 percent from a year ago.”
According to The New York Times: “Wages increased by 2.6 percent over the past year, not much faster than inflation. That modest uptick probably would not prompt the Federal Reserve to raise its benchmark interest rate more aggressively than it has signaled, economists said.”
According to The Wall Street Journal: “Economic theory suggests that when workers become this scarce, employers raise wages quickly to recruit and retain employees. But wage growth has persistently undershot economist expectations. Friday’s report showed average hourly pay grew 4 cents over the past month and 2.6% over the past year.”
3. What does that mean for interest rates? Fluctuations in numbers are to be expected, but how will the latest numbers affect interest rates, if they will at all?
According to The Wall Street Journal: “The current situation provides a conundrum for the Federal Reserve, which raised short-term interest rates earlier this year and has penciled in at least two more increases for 2018. The Fed expects unemployment to fall to 3.8% by year-end, but if the rate falls further than expected, the Fed could be pressured to raise rates more aggressively to prevent the kind of economic overheating the U.S. has experienced in the past when unemployment was low.”
According to Bloomberg: “Despite the softer-than-expected wage reading, an unemployment rate drifting further below Federal Reserve officials’ estimates of levels sustainable in the long run may in their view add to upward pressure on wages and inflation. That would keep the central bank on track to raise interest rates in June for the second time this year and once or twice more after that in 2018.”