Hiring growth remains solid in April

Summary

Hiring continued to chug along in April, with nonfarm payrolls once again coming in well-above expectations with an increase of 253K. While hiring in February and March were revised downward by a combined 149K, the three-month average pace of gains remains respectable at 222K.

The ongoing strength of hiring is keeping the labor market extraordinarily tight even as the supply picture has improved in recent months. In April, the unemployment rate fell to 3.4% to match the lowest rate in 53 years, while average hourly earnings growth picked up, rising 0.5%. Including upward revisions to prior months' data, average hourly earnings are advancing at a three-month annualized rate of 4.2%, dashing prior signs that wage pressures were starting to cool in a meaningful way.

While the jobs market has remained incredibly resilient, clouds continue to gather. Hiring momentum has slowed, with deteriorating demand for workers pointing to more pronounced weakening ahead. We look for job growth to slow more meaningfully in the second half of the year and into 2024 as the lagged effect of monetary policy tightening bites.

Hiring growth remains solid in April

Nonfarm payrolls rose by 253K in April, 68K above the Bloomberg consensus forecast for a 185K gain. Downward revisions to the prior two months took some shine off of the reading as job growth over February and March was revised lower by a combined 149K jobs. Professional and business services employment posted a solid 43K increase in April, and healthcare payrolls rose a similarly strong 40K. Leisure and hospitality employment rose by 31K in April, a deceleration from an average of 73K new jobs per month over the past six months. Leisure and hospitality employment remains roughly 400K below its February 2020 level and probably still has some room to run as staffing in that sector continues its long recover from the pandemic. Despite the ongoing challenges in the factory sector, manufacturing employment rose by 11K, more than reversing the 8K decline in March. Similarly, construction employment rose 15K in the month. The employment diffusion index, which is a measure of the breadth of job across industries, was 57.4 in April. This is off the highs but roughly in line with the average seen in 2019.

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