The nation’s employers pulled back on their hiring in April, adding a modest 175,000 jobs in a sign that persistently high interest rates may be starting to take a bigger toll on the world’s largest economy.
Friday’s government report showed that last month’s hiring gain was down sharply from the blockbuster increase of 315,000 in March. And it was well below the 233,000 gain that economists had predicted for April, suggesting that the Federal Reserve’s aggressive streak of rate hikes may finally be cooling the pace of hiring.
Even with the slowdown, last month’s job growth amounted to a decent increase, though it was the lowest monthly job growth since October. With the nation’s households continuing their steady spending, many employers have had to keep hiring to meet their customer demand.
The unemployment rate ticked up 3.9% — the 27th straight month in which it has remained below 4%, the longest such streak since the 1960s.
The state of the economy is weighing on voters’ minds as the November presidential campaign intensifies. Despite the strength of the job market, Americans remain generally exasperated by high prices, and many of them assign blame to President Joe Biden.
America’s job market has repeatedly proved more robust than almost anyone had predicted. When the Fed began aggressively raising rates two years ago to fight a punishing inflation surge, most economists expected the resulting jump in borrowing costs to cause a recession and drive unemployment to painfully high levels.
The Fed raised its benchmark rate 11 times from March 2022 to July 2023, taking it to the highest level since 2001. Inflation did steadily cool as it was supposed to — from a year-over-year peak of 9.1% in June 2022 to 3.5% in March.
Yet the resilient strength of the job market and the overall economy, fueled by steady consumer spending, has kept inflation persistently above the Fed’s 2% target. As a result, the central bank is delaying any consideration of interest rate cuts until it gains more confidence that inflation is steadily slowing toward its target.
Fed rate cuts, which would, over time, reduce the cost of mortgages, auto loans and other consumer and business borrowing. Most economists envision no rate cuts before fall at the earliest.
The job market has been showing some signs of eventually slowing. This week, for example, the government reported that job openings fell in March to 8.5 million, the fewest in more than three years. Still, that is nevertheless a large number of vacancies: Before 2021, monthly job openings had never topped 8 million, a threshold they have now exceeded every month since March 2021.
On a month-over-month basis, consumer inflation hasn’t declined since October. The 3.5% year-over-year inflation rate for March was still running well above the Fed’s 2% target.