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U.S. economy added 253,000 jobs in April, powering economy through turmoil

The unemployment rate dropped to 3.4 percent last month, according to a Bureau of Labor Statistics report released Friday

Job seekers formed long lines during a recruitment drive in Baltimore in April. (Bill O'Leary/The Washington Post)
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Employers created 253,000 jobs in April, keeping the U.S. economy afloat amid a banking crisis, rising interest rates, the prospect of devastating U.S. government default and a spike in layoffs.

The unemployment rate dropped to 3.4 percent last month, according to a Bureau of Labor Statistics report released Friday, matching a low from May 1969.

“This jobs report does not look recessionary at all,” said Bill Adams, chief economist for Comerica Bank. “Other economic indicators give more reasons for concern, but the jobs report says the labor market is still extremely tight.”

The remarkable strength of the pandemic recovery labor market, despite some softening, is buoying the U.S. economy through enormous uncertainty. The April jobs report, which beat economists’ forecasts, showed the 28th straight month of solid job growth. Adults in their prime working age of between 25 and 54 are back in the workforce at rates not seen since before the labor market wreckage of the Great Recession. Jobless benefit claims have been slowly inching up but still show no signs of an economic downturn.

The Black unemployment rate, which over the years has trended at twice the White unemployment rate, fell to a record low in April, at 4.7 percent.

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Wages, which have been growing more than the Federal Reserve would like to tamp down inflation, accelerated between March and April, with average hourly earnings increasing by 0.5 percent to $33.36. Wage growth — which is good for workers and drives consumer spending — could also be contributing to inflation, policymakers say.

President Biden cheered on the jobs report at a Cabinet meeting on Friday, before urging Congress to pass a debt limit bill to avoid a catastrophic default. “The really good news is working-age Americans are participating in the labor force at the highest rate in 15 years, not just since the pandemic,” Biden said.

All three major stock indexes jumped on Friday’s opening, rebounding from losses on Thursday related to amplifying concerns about bank stability. Investors could also be optimistic that despite hardy job gains, the labor market’s overall slowing is a sign that the Fed will resist further tightening of financial conditions.

Payrolls continued to swell in industries that provide services in April, as American consumers have shifted their remarkable post-pandemic spending splurge away from goods toward experiences and outings. Professional and business services saw the largest gains, with 43,000 jobs added, largely in scientific and technical fields, despite widespread layoffs in tech, which falls within the sector.

Health care, meanwhile, mushroomed by 40,000 jobs, as demand from an aging population has continued to boom coming out of pandemic lockdowns.

Leisure and hospitality — an industry that has struggled to hire as consumers have flooded back into restaurants, hotels and bars — grew by 31,000 in April. The industry has added an average of 73,000 jobs per month over the past half year, but it remains below its pre-pandemic level by about 400,000 jobs.

Social assistance added 25,000 jobs, strong growth concentrated in sectors like family and individual services, such as social work.

Meanwhile, construction, manufacturing, wholesale trade, retail trade, transportation and warehousing saw little change, as these industries that boomed during covid have slowed as demand has shifted and higher interest rates have made borrowing more expensive.

Temporary help services lost 23,000 jobs. Job losses in the temp industry are often a bellwether for economic downturns as employers let these workers go first.

Job gains for March and February were revised downward by roughly 70,000 jobs each to 165,000 and 248,000, respectively, in a sign that the labor market is actually cooler than initial jobs numbers suggest.

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Federal Reserve Chair Jerome H. Powell said on Wednesday that he remains optimistic that the United States can narrowly avoid a recession thanks to the ongoing resilience of the labor market, which has persevered in the face of more than a year of aggressive interest rate increases.

“We’ve raised rates by 5 percentage points in 14 months and the unemployment rate is 3.5 percent — pretty much where it was, even lower than it was when we started,” Powell said. “It wasn’t supposed to be possible for job openings to decline by as much as they’ve declined with our unemployment going up. Well, that’s what we’ve seen.”

Still, Powell said, there are “no promises,” and he didn’t rule out the possibility of an economic slump. “It’s possible that we will have what I hope would be a mild recession,” Powell said. Federal Reserve officials will be closely monitoring economic indicators over the next month, including Friday’s jobs report, to determine whether Wednesday’s interest rate hike will be the last for a while.

Adam Ozimek, Economic Innovation Group chief economist, said that Friday’s report would not necessarily sway the Fed to step on the brakes.

“The bad news is that wage growth hasn’t come down as much as it needs to and inflation hasn’t come down as much as it needs to,” Ozimek said. “But [this report] will give the Fed comfort that the labor market isn’t rapidly headed towards recession.”

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The U.S. economy is souring on a number of other fronts. The country’s economic growth slowed in the first quarter of 2023, growing at an annual rate of 1.1 percent as manufacturing outputs and retail sales have fallen. The spring’s banking crisis is sending shock waves through financial markets, leading banks to become less willing to lend, which is needed for business growth and hiring. That can slow the economy further.

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Despite its resilience, the labor market appears to be cooling off. Employers have more leverage over workers than they had a year ago. The pace of job creation, with some exceptions, has tempered notably during the past two years, falling to its lowest level in March since December 2020.

Major companies, including Lyft, Deloitte, Facebook’s parent company Meta and Whole Foods have announced mass layoffs in recent weeks. Most of the layoffs have been concentrated within tech, financial services and housing, industries that boomed during the pandemic.

Layoffs and discharges jumped in March, returning to a typical pre-pandemic level, according to a Labor Department job openings report released Tuesday. And a slight rise in claims for unemployment benefits over the past few weeks suggest that some laid-off workers are not finding new jobs as easily as a few months ago.

“If you’re in a situation where you’ve lost your job and you’re in an industry that’s undergoing a lot of layoffs, you might be starting to get concerned about your ability to find a job again,” said Guy Berger, principal economist at LinkedIn.

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Meanwhile, overall job openings also fell to 9.6 million in March, the lowest number in nearly two years, in a sign that the Federal Reserve’s interest rate hikes are working to dampen demand for workers. At the height of the hot labor market marked by worker shortages, there had been two jobs for every unemployed worker. Now that rate has fallen to 1.6 jobs for every unemployed worker.

“There’s steam coming out of the labor market,” Berger said. “Workers are losing their bargaining power. The pendulum is swinging toward employers.”

Brandon Hyman, 32, lost his job as a product designer at Dropbox last week when the company announced it was laying off about 500 employees, or 16 percent of the workforce. Hyman, who lives in Long Beach, Calif., worries that he won’t be able to find a new position with the same pay, benefits and remote work options.

“I feel fortunate to have some savings, but I’m worried that it’s a very competitive market for tech since so many companies have laid people off,” Hyman said. “Lot of companies are wanting people to return to an office either full time or a couple days a week. That’s something I don’t want to do because of the ongoing global pandemic.”

While the labor market has softened, the share of adults in the workforce, which the Fed has watched closely as the labor market has remained hotter than it would like, has slowly inched up to 62.6 percent, in April.

Most Americans who left the workforce during the pandemic have returned to their jobs, easing labor shortages. The labor market as a whole has regained 75 percent of the 4 million workers who dropped out of the workforce during covid due to retirements, lack of child care and health concerns, according to an analysis by The Washington Post.

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Chelsey Popanz, a mother of two young children in Cassville, Mo., spent the pandemic hopping in and out of the workforce based on the availability of affordable child care. She held jobs as a zookeeper, hotel bartender, casino bartender and banquet captain. She also spent months out of work when her fiance could support their household on his $19.75-an-hour paycheck as a welder.

Now Popanz is firmly back at work as a 911 operator on the night shift, making $16.80 an hour. Popanz said she was drawn back to work through a combination of finding a decent-paying job for the area, getting child care thanks to her extended family’s help and needing more money to cover rising prices of gas, food and utilities.

“The only reason I came back is because I need the money,” said Popanz, 26. “I personally would love to stay home with my kids. But financially, we’re probably bringing in $5,000 to $6,000 a month and we literally have nothing to show for it because of our bills. We’re getting by with a little bit left over but not enough to thoroughly enjoy life.”