The U.S. economy added 175,000 jobs in April, while the unemployment rate ticked up to 3.9% from 3.8%, the Labor Department said on Friday.
Why it matters:
Jobs growth slowed from the prior month’s hot pace, but the data suggests that the labor market is still chugging along with healthy demand for workers.
The pace of hiring was notably slower than economists’ estimate of 240,000 jobs in April.
Job gains in March were slightly better than previously thought, upwardly revised to 315,000 from 303,000—though payrolls in February were revised lower by 34,000 to 236,000.
Driving the news:
The lower-than-expected job gains were concentrated in health care, social assistance, transportation and warehousing
Average hourly earnings, a measure of wage growth, rose 0.2%.
Over the past 12 months, average hourly earnings increased 3.9%.
State of play:
Friday’s data is the latest evidence that the labor market is holding steady — an important development for the broader economy.
The Federal Reserve this week kept interest rates at the highest level in more than two decades.
Its policymakers suggested that any rate cuts would happen later than previously thought due to stalled progress on curbing inflation.
Fed chair Jerome Powell this week said that the central bank would be “prepared to respond to an unexpected weakening in the labor market.”
The labor market showed resiliency in February, adding 275,000 jobs, a sign that economic growth is still solid.
If the economy is slowing down, nobody told the labor market.
Employers added 275,000 jobs in February, the Labor Department reported Friday, in another month that exceeded expectations.
It was the third straight month of gains above 200,000, and the 38th consecutive month of growth — fresh evidence that after surging back from the pandemic shutdowns, America’s jobs engine still has plenty of steam.
“We’ve been expecting a slowdown in the labor market, a more material loosening in conditions, but we’re just not seeing that,” said Rubeela Farooqi, chief economist at High Frequency Economics.
The previous two months, December and January, were revised down by a combined 167,000 jobs, reflecting the higher degree of statistical volatility in the winter months. That does not disrupt a picture of consistent robust increases, which now looks slightly smoother..
At the same time, the unemployment rate, based on a survey of households, increased to a two-year high of 3.9 percent, from 3.7 percent in January. A more expansive measure of slack labor market conditions, which includes people working part time who would rather work full time, has been steadily rising and now stands at 7.3 percent.
The unemployment rate was driven by people losing or leaving jobs as well as those entering the labor force to look for work. The labor force participation rate for people in their prime working years — ages 25 to 54 — jumped back up to 83.5 percent, matching a level from last year that was the highest since the early 2000s.
Average hourly earnings rose by 4.3 percent over the year, although the pace of increases has been fading.
“We’ve recently seen gains in real wages, and that’s encouraged people to re-enter the labor market, and that’s a good development for workers,” said Kory Kantenga, a senior economist at the job search website LinkedIn. As wage growth slows, he said, the likelihood that more people will start looking for work falls.
As late as last fall, economists were predicting much more modest employment increases, with hiring concentrated in a few industries. But while some pandemic-inflated industries have shed jobs, expected downturns in sectors like construction haven’t materialized. Rising wages, attractive benefits and more flexible work schedules have drawn millions of workers off the sidelines.
Elevated levels of immigration have also added to the labor supply. According to an analysis by the Brookings Institution, the influx has approximately doubled the number of jobs that the economy could add per month in 2024 without putting upward pressure on inflation, to between 160,000 and 200,000.
Health care and government again led the payroll gains in February, while construction continued its steady increase. Retail and transportation and warehousing, which have been flat to negative in recent months, picked up.
No major industries lost a substantial number of jobs. Credit intermediation continued its downward slide — that sector, which mostly includes commercial banking, has lost about 123,000 jobs since early 2021.
That doesn’t mean the employment landscape looks rosy to everyone. Employee confidence, as measured by the company rating website Glassdoor, has been falling steadily as layoffs by tech and media companies have grabbed headlines. That’s especially true in white-collar professions like human resources and consulting, while those in professions that require working in person — such as health care, construction and manufacturing — are more upbeat.
“It is a two-track labor market,” said Aaron Terrazas, Glassdoor’s chief economist, noting that job searches are taking longer for people with graduate degrees. “For skilled workers in risk-intensive industries, anyone who’s been laid off is having a hard time finding new jobs, whereas if you’re a blue-collar or frontline service worker, it’s still competitive.”
The last few months have been studded with strong economic data, leading analysts surveyed by the National Association for Business Economics to raise their forecasts for gross domestic product and lower their expectations for the trajectory of unemployment. It’s occurred even as inflation has eased, leading the Federal Reserve to telegraph its plans for interest rate cuts sometime this year, which has raised growth expectations further.
Mervin Jebaraj, director of the Center for Business and Economic Research at the University of Arkansas, helped tabulate the survey responses. He said the mood was buoyed partly by fading trepidation over federal government shutdowns and draconian budget cuts, after several close calls since the fall. And he sees no obvious reason for the recovery to end soon.
“Once it starts going, it keeps going,” Mr. Jebaraj said. “You had this external stimulus with all the trillions of dollars of government spending, Now it’s sort of self-sustaining, even though the money’s gone.”
The U.S. economy added 353,000 jobs in January, while the unemployment rate held at 3.7%, the Labor Department said Friday.
Why it matters:
The first look at the 2024 labor market shows it’s on fire — not slowing down as previously thought.
Details:
The January payroll figures show hiring picked up from the 333,000 added the prior month, which itself was revised higher by 117,000.
Job gains in November were revised slightly higher, too, by 9,000 to 182,000 jobs added.
What’s new:
The hiring boom last month came amid strong job gains in health care, retail and professional and business services, while mining and oil and gas extraction are among the sectors that shed jobs.
Meanwhile, the labor force participation rate — the share of workers with or looking for a job — was 62.5% in January.
Average hourly earnings, a measure of wage growth, soared by 0.6%. Over the past 12 month, average hourly earnings increased by 4.5%.
The big picture:
The data is the latest in recent weeks to show that the economy is revving up, with fading inflation and steady hiring — a welcome development for the Biden administration that is touting its economic agenda ahead of the 2024 election.
The intrigue:
The strong growth in both jobs and earnings will make the Federal Reserve reluctant to cut interest rates soon, out of fear that labor market strength could reverse progress on inflation.
Already this week, Fed chair Jerome Powell threw cold water on the idea of a March rate cut.
The bottom line:
Despite high profile layoffs at media and technology companies, the report shows that broader labor market is heating up.
The U.S. economy added 216,000 jobs last month while the unemployment rate held at 3.7%, the Labor Department said on Friday.
Why it matters:
The final snapshot of the 2023 labor market shows hot hiring — the latest sign that the American job market continues to defy expectations of a slowdown.
The figure is well-above the roughly 170,000 jobs economists expected.
The big picture:
The Federal Reserve has hinted it likely won’t raise interest rates again with encouraging signs that inflation is easing and the labor market is cooling.
That concludes an aggressive rate hiking cycle that began in 2022 and lasted through much of last year.
For now, however, there is little evidence those rate hikes translated into pain for workers in 2022.
American consumers, however, remain dissatisfied with the economy — a problem that may continue to weigh on the Biden White House as the 2024 election heats up.
Details:
Friday’s jobs report shows the labor market stayed strong. Hiring increased in sectors including government, health care, and construction. Transportation and warehousing shed jobs.
Average hourly earnings, a measure of wages, rose by 0.4% last month. Compared to the prior year, average hourly earnings rose 4.1%.
The share of the population with in the labor force — that is, with a job or looking for one — was 62.5% in December, roughly 0.3 percentage point less than the prior month.
The Labor Department also said the economy added a combined 71,000 fewer jobs than initially estimated in October and November.
The bottom line:
The hotter-than-expected jobs figures are one of several more key economic reports due before Federal Reserve officials meet at the end of the month.
We had an interesting exchange with a health system CEO this week, which started as a discussion about what to tell his board about the rapidly changing AI landscape, but drifted into a larger conversation about how human-dependent healthcare is. His system has invested heavily in virtual care and has begun to make strides in applying automation and artificial intelligence to both clinical care delivery and key operational processes. He’s glimpsed the potential for process automation—AI’s less sexy sibling, now that “generative AI” has burst onto the scene—to radically reduce staffing costs in areas like revenue cycle management.
And that’s making him wonder about the larger implications for workforce development—both inside his organization and in the economy as a whole. Like many health systems, his organization not only provides care to the community, but also employment opportunities and job growth.
What happens when large swaths of healthcare delivery become more automated—how will the system look to retrain those workers for other roles?
One clear area of workforce need over the coming decades will be hands-on caregiving for an older, sicker population that wants to age in place. Health aides, home health workers, community social workers and so forth—will those roles ultimately be filled by workers from other parts of healthcare (and the economy beyond) who find themselves displaced by AI and robotics?
Will the Amazon warehouse worker of today become the home care worker of tomorrow?
The conversation was fascinating and made us realize that we’ve paid too little attention to two key issues.
First, the tension between healthcare as a cost problem and healthcare as a source of job growth.
And second, the redistribution of workers into roles that will require hands-on, human presence (like caregiving) in the coming wave of AI and robotics.
The latest Altarum Health Sector Economic Indicators show that health spending as a percent of GDP has stabilized near 17.5%, health care price growth and economywide inflation recently converged, and the health sector added over 60,000 jobs in July. See the highlights below.
Health spending as a percent of GDP has stabilized at 17.5%
In June 2023, national health spending grew by 5.0%, year over year, and now represents 17.5% of GDP, equal to the average percent of GDP for the previous 12 months.
Nominal GDP in June 2023 was 5.8% higher than in June 2022, and grew 0.8 percentage points faster than health spending.
Neglecting government subsidies, spending on personal health care in June increased by 8.1%, year over year, and by 7.3% when subsidies are included, exceeding the GDP growth rate for the fifth consecutive month.
Neglecting government subsidies, year-over-year spending on home health care (12.2%) and nursing home care (12.0%) grew fastest in June, while physician and clinical services spending increased the least (6.9%) among major categories.
Personal health care growth (neglecting government subsidies), which continues to be dominated by growth in utilization rather than price increases, has slowed somewhat in the past 4 months.
Health care price growth and economywide inflation finally converge
The overall Health Care Price Index (HCPI) increased by 2.7% year over year in July, slowing 0.1 percentage points from the slightly revised rate in June (2.8%).
For the first time in over two years, health care price growth exceeded overall inflation as economywide price growth (measured by the GDP Deflator) fell to 2.6% in June, its lowest growth rate since March 2021.
In new data for July, overall year-over-year CPI growth actually increased slightly to 3.2%, the first increase in its growth rate since June 2022, driven primarily by changes in commodities price growth.
Among the major health care categories, prices for nursing home care (5.5%) and dental care (5.1%) grew fastest, while physician and clinical services (0.7%) price growth was the slowest in July.
Year-over-year growth in hospital prices paid by private payers fell nearly 2.5 percentage points over the past two months (from 6.1% in May to 3.7% in July), beginning to converge with public payer price growth. In July, growth in Medicare and Medicaid hospital prices reached 2.6% and 2.3% growth respectively.
Our implicit measure of health care utilization growth declined in June, up 4.5% year over year, and down somewhat from slightly revised data (4.9% growth) a month prior.
Health care adds 63,000 jobs in July, the largest increase since July 2022
Health care added 63,000 jobs in July 2023, exceeding the average of 43,700 jobs added per month for the first 6 months of the year and the largest monthly increase in the past year.
July’s health sector job growth was led by growth in ambulatory care settings, which added 35,400 jobs, followed by hospitals, which added 16,100 jobs.
Nursing and residential care facilities added 11,500 jobs in July, with growth occurring in both nursing homes (6,300 jobs) and other nursing and residential care settings (5,200 jobs).
The economy added 187,000 jobs in July, somewhat below the 12-month average of 280,200 jobs. The unemployment rate, at 3.5%, changed little in July.
Health care wage growth in June 2023 was 3.7% year over year, somewhat below the total private sector wage growth of 4.4%.
Wage growth in health care settings is now highest in nursing and residential care, at 4.8% year over year in June 2023. Wage growth in hospitals was 4.3%, while wage growth in ambulatory care settings was 3.0% in June.
The U.S. economy added 339,000 jobs in May, while the unemployment rate jumped to 3.7% from 3.4%, the Labor Department said Friday.
Why it matters:
Job gains came in well above forecasters’ expectations — the latest sign that the economy is still underpinned by a hot labor market.
Economists expected a gain of 190,000 jobs last month. The May jobs figures are a pickup from the 294,000 added in April, which was revised up by 41,000. Job gains in March were revised up, too.
Details:
Economic policymakers have kept a close eye on other details from the payrolls report — whether more Americans are joining the workforce and how quickly pay is rising.
The labor force participation rate — the share of workers with a job or hunting for one — held at 62.6% in May.
Meanwhile, average hourly earnings, a measure of pay, rose by 0.3% in May. Compared to the same period a year ago, wages are up 4.3%.
What we’re watching:
The May jobs report is among the final data points Federal Reserve officials will consider before deciding whether to continue the interest rate hiking campaign that began more than a year ago.
Inflation remains too high, and there are concerns that rapid price gains are being fueled by the tight labor market and strong consumer demand.
Still, a top Fed official this week signaled the central bank may skip a rate hike at its meeting later this month.
A phenomenon that defined the pandemic-era labor market is over: the Great Resignation — workers furiously quitting for new, likely higher paying jobs — is a thing of the past.
Why it matters:
The historic surge of quitters was a symptom of an on-fire labor market, where demand for workers far outstripped supply of them.
Now the job market may be entering a different era — one that more closely resembles pre-pandemic times.
By the numbers:
The quits rate fell to 2.4% in April, according to the Job Openings and Labor Turnover Survey, released this morning.
That is just a tick (0.1 percentage point) higher than the quits rate in February 2020 — and roughly in line with the average quits rate in 2019.
Even leisure and hospitality workers, once the poster child for the quits boom, are returning to pre-pandemic norms: the quits rate in this segment hit 4.6% in April — very close to the January 2020 rate of 4.4%, and well-below the peak 5.8% recorded last summer.
What they’re saying:
“We are pretty much back to a strong, robust labor market, but one that is no longer overheating,” says Julia Pollak, an economist at ZipRecruiter.
“One that isn’t plagued by widespread labor shortages that are wreaking havoc across the economy, and causing firms to offer off-cycle wage increases and dispense of all hiring requirements. The deck isn’t totally stacked in jobseekers‘ favor anymore.”
Flashback:
At the height of the Great Resignation, the overall quits rate most recently peaked at 3% in April 2022, when there were roughly 4.5 million quits in a single month.
Turnover of that magnitude had never been seen before — at least not since the Labor Department started collecting the data in 2000.
Workers were in such high demand that they felt confident enough to ditch current gigs for new (likely higher paying) ones.
The bottom line:
Americans who did job hop over the past few years have seen heftier pay gains. But that phenomenon, too, is fading — another sign of some heat coming off the labor market.
Job-changers saw annual pay grow more than 13% in April, according to payroll professor ADP — more than double the annual rate of job-stayers.
Still that was the slowest pace of growth since November 2021.
The labor market added 253,000 payrolls in April, while the unemployment rate dipped to 3.4% — a historically low level.
Why it matters:
Job growth continued to boom last month, the latest sign that economy has strong momentum despite recent bank failures.
Economists expected a gain of 185,000 jobs last month.
Details:
The April job figures are a pickup from the 165,000 jobs added the previous month, which were revised down by 71,000, the Labor Department said on Friday.
The Labor Department said that jobs growth in the previous two months was lower than first estimated: jobs growth was revised down by a combined 149,000 for February and March.
The big picture:
In recent months, more Americans have joined the workforce, helping to ease labor force shortages.
The labor force participation rate — or the share of workers employed or looking for work — held at 62.6% in April.
Average hourly earnings, a measure of wage growth, rose to 0.5% in March. Wages rose 4.4% from the same time last year.
But Fed Chair Jerome Powell said this week that there were signs that the workforce was “coming back into better balance,” though it remained “very tight.”
Contrary to widespread reports of staffing shortages, healthcare employment reached pre-pandemic levels with the addition of 44,200 jobs in February, according to a recent report from Altarum.
A recent survey of hospital CEOs found that healthcare staffing was their top concern. Nurses nationwide have reported unsafe staffing levels, leading health systems to restructure and lawmakers to consider safe-staffing laws.
Yet, healthcare currently has 1.3 percent more jobs than it did in February 2020, according to the monthly Health Sector Economic Indicators brief from Altarum. The nonprofit, healthcare-focused research and consulting organization analyzes available data on spending, prices, employment and utilization to craft the monthly report.
The data holds that this isn’t a new occurence. The sector has been adding — on average — 49,100 jobs per month for the past year, according to the brief. In February, hospitals led that growth, tapping 19,400 workers. Nursing and residential care facilities added 13,700 jobs, and ambulatory care settings added 11,100.
However, as healthcare employment rises, its wage growth continues to decline and now lags behind economywide growth. Healthcare wage growth has been declining since mid-2022; in January, pay grew 4.2 percent year over year, while total private sector wage growth grew 4.4 percent.
This statistic also defies industry narratives, as recent labor negotiations between unions and health systems have scored big raises for workers and clinicians.
HENRY KOTULA 