Is the economy cooling?
The US’s unemployment rate unexpectedly increased in April as employers opted to ease off on hiring, a development that some believe indicates an impending cooldown in the labor market.
New data released Friday by the Bureau of Labor Statistics showed the unemployment rate jumped to 3.9% last month, a 0.1% increase from April, with nonfarm payrolls increasing by 175,000 – the smallest jobs gain for six months.
That increased marked lower growth than anticipated by economists polled by Reuters, who had expected expansion of 243,000 – and wages also rose at a slower pace than previously, increasing by 3.9% following a 4.1% uptick in March.
Mortgage Bankers Association vice president and deputy chief economist Joel Kan said the report indicated “a little less strength than expected,” and said the slowdown would likely ease upward pressure on service sector inflation.
Payroll employment increases by 175,000 in April; unemployment rate changes little at 3.9% https://t.co/ZwrVfLviqL #JobsReport #BLSdata
— BLS-Labor Statistics (@BLS_gov) May 3, 2024
The central bank opted to keep its funds rate on hold in its most recent policy rate announcement (May 1), indicating that inflation continued to run too high to justify bringing rates lower.
“Today’s report might give them some leeway to [cut rates] if the job market continues to weaken and if inflation trends start to follow,” Kan said.
First American deputy chief economist Odeta Kushi also said the Fed could have more reason to cut rates later in the year if inflation data moderates in line with the labor market cooldown.
“This April jobs report is important in that it can ease Fed fears of any potential overheating in the labor market,” Kushi said. “The soft jobs report may bring some immediate mortgage rate relief to the spring homebuying season – the 10-year Treasury yield dived below 4.5% in response to the jobs report, which will put some downward pressure on mortgage rates.”
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