US labor market exceeds forecasts with 175,000 new jobs

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The United States added 175,000 jobs in April, well below expectations and the smallest increase in six months, as the labor market cools in the world’s largest economy.

Friday’s last-month nonfarm payrolls figure compared with forecasts for a 241,000 increase in a Bloomberg survey, raising expectations that the Federal Reserve could cut interest rates sooner than previously thought. .

The release comes after the US central bank signaled on Wednesday that interest rates would remain at a 23-year high of 5.25 to 5.5 percent for even longer than expected, while struggles with persistent inflation.

Futures market traders responded to the data by bringing forward expectations for when the Federal Reserve’s first interest rate cut could occur this year: to September, from November before the data. The futures market already fully takes into account two cuts this year.

The two-year Treasury yield, which moves with interest rate expectations, was down 0.05 percentage point at 4.82 percent by midmorning, but had fallen as much as 0.16 percentage point to a low. a month shortly after the report was published. . The S&P 500 rose 1 percent.

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U.S. unemployment rose slightly to 3.9 percent, compared with estimates of 3.8 percent. Friday’s figures also represented the slowest pace of monthly job growth since October 2023.

Revisions to February and March data showed 22,000 fewer jobs were created than previously reported. The slowdown in job creation was most pronounced in leisure and hospitality, construction and the government sector, while employment remained strong in healthcare and retail trade.

The report also showed that average weekly hours worked decreased slightly and earnings growth was weak.

“It was a record, or near-record, warm winter that might have boosted job growth a little, and now we’re getting back on track,” said Paul Ashworth, chief North America economist at Capital Economics. “But this definitely makes the market think that rate cuts might not be out of the question, because it’s not just a slowdown in job growth, but there are also pretty weak average hourly earnings.”

Even with the labor market cooling, the Fed’s next steps will be driven more by inflation data, given concerns that it has not fallen as quickly as officials had hoped. “Inflation readings will set the tone for the Federal Reserve,” said Kathy Bostjancic, chief economist at Nationwide.

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However, the numbers will likely dampen any discussion that the Federal Reserve might be forced to raise interest rates further to quell an overheated economy, which will come as a relief to the US central bank.

“This is still a very strong jobs report; there’s not much sign that cracks are forming in the labor market,” said Ryan Sweet, chief U.S. economist at Oxford Economics. “Overall, this is what the Fed wanted to see: a slowdown in job growth and a cooling of the labor market a little bit or just a rebalancing.”

However, Veronica Clark, U.S. economist at Citi, said she was “a little worried” that Friday’s report was the “first sign” that the labor market could be slowing. “The hiring rate is falling, hours worked are decreasing and part-time and unstable work is increasing. All these signs that companies are looking to reduce labor costs.”

With less than six months until the US election, President Joe Biden described the data as another sign of the economy’s resilience under his leadership. “The great American comeback continues,” he said in a statement.

“When I took office, I inherited an economy on the brink, with the worst economic crisis in a century. He had a plan to change our country and build our economy from the center out and from the bottom up. “Now we are seeing that plan in action.”