April Employment Growth Picks Up After A Weak Gain In March

US companies added 168,000 workers in April, moderately more than the 138,000 gain in the previous month, which marked the softest increase since last September, the Labor Department reports. The advance kept the annual trend steady, which suggests that moderate growth for the labor market overall remains a reasonable forecast for the near term.

Private employment increased 1.84% for the year through last month, fractionally lower vs. the 1.85% increase through March, based on this morning’s update. Although recent annual growth is well below the post-recession peak of nearly 2.6% in February 2015, the latest year-over-year gain is strong enough to keep economic growth positive and recession risk at bay.

“Overall, it’s a good report,” notes Michael Feroli, chief US economist at JPMorgan Chase. “Slack is getting absorbed,” he says, although “the process of that translating into faster wages has been slow. Wages are clearly the one disappointing part of the report.” He adds that today’s numbers are “probably a wash” for the Federal Reserve in terms of influencing the calculus for future interest-rate hikes.

One of today’s updates is a widely followed measure of wage growth – average hourly earnings for private-sector employees held steady at a year-over-year pace of 2.56% through April. That’s essentially unchanged from March and a middling rate compared with recently history.

As an indicator of inflation, today’s wage-growth data suggests that pricing pressures will remain relatively tame for the near term.

In terms of business-cycle risk, the April employment reports reaffirms what’s been reflected in a broad reading of the macro trend: recession risk remains low.

Underlining the low macro risk is the news that the unemployment rate ticked down to 3.9% last month, an 18-year low. “We’ve continued to add jobs routinely every month for so long, and the unemployment rate we have reached is amazing,” observes Catherine Barrera, chief economist at ZipRecruiter, an employment web site. “It’s very incredible.”

By some accounts, however, the data du jour highlights a modest deceleration in economic activity, which showed up in the slowdown in first-quarter GDP growth.

“Net-net [today’s April employment report] was a little bit softer than people were expecting,”  says Charlie Ripley, senior investment strategist at Allianz Investment Management. “This goes into a lot of the other data that we’ve been seeing, … a little bit of a soft patch.”

For the moment, however, the soft patch isn’t expected to deteriorate into a warning sign for the US economic expansion, which will celebrate its ninth anniversary next month – the second-longest expansion on record, according to NBER data. Using today’s employment release as a guide implies that the end of this economic run is nowhere on the immediate horizon.