US labor sector grows above expectations in April

The US Labor Department’s employment report showed non-farm payrolls rose by 428,000 jobs in April, equivalent to previous month’s downwardly revised figure from 431,000, beating forecast for 391,000 rise in new jobs.

The report also showed the unemployment rate remained unchanged at 3.6% in April, while average hourly earnings increased by 0.3% m/m last month after rising by 0.5% in March and fell below 0.4% forecast.

Annualized figure showed increase in wages dropped to 5.5% in April from 5.6% in March but remains robust and holding near the highest in two years, however the wage pressures are likely to extend, due to record job openings last months that pushed the ratio between vacancies and unemployed to nearly 2 – 1, as the total number of job openings is about 5.6 million more than the total labor force

Increased hiring in manufacturing (55,000 jobs) as well as services sector, particularly in hospitality (78,000 jobs and leisure (44,000 jobs), were the main contributors to stronger than expected NFP figure in April, signaling that the economy is in good shape, despite drop in production in the first quarter.

Strong rise in jobs openings as the economy is accelerating in post-pandemic recovery, compared to much lower number of people looking for work, presents a problem to the Fed which faces a difficult task to reduce a number of job openings but to keep jobs intact, as unemployment usually rises during quick monetary policy tightening, while businesses may reduce hiring plans due to lower demand on higher inflation or to add inflation through higher wages.