April showers

May 3, 2024

Nonfarm payrolls rose by 175,000 in April, less than the 240,000 markets expected, and lower than the 242,000 average of the last twelve months.  Net revisions to the previous two months were to the downside by 22,000. Healthcare and social services accounted for nearly half of those gains, with an increase of 87,000. The big miss on job gains for the month was in state and local hiring, which took a breather, after surging since mid-2023. Job openings at the state and local levels remained extremely elevated at the end of March, which suggests that sector will come back in May.

Transportation and warehousing were up 22,000 as retail trade increased by 20,000. That was a sector which drove employment gains earlier in the recovery, lost ground, was in a funk much of 2023 but is now showing new signs of life. The sector saw the largest gains in the employment cost index, which is the most comprehensive measure of compensation, in the first quarter. Average hourly earnings surged 6.4% in the first quarter, the second strongest quarter for those wages since reopening after COVID. The peak was a 6.8% jump in the first quarter of 2022. Gains were front-loaded into the first part of the year, but bear watching given the increase in service sector inflation, including transportation costs.

Manufacturing employment was up 8,000, with a slowdown in vehicle production offsetting a rise in non-durable goods, including food production. Vehicle inventories have moved above a 70-day supply on dealer lots, well above the 60-day norm pre-pandemic. Construction employment increased by 9,000, mostly in specialty contractors for commercial construction.

The largest job losses were in information, which reflected weakness in hiring in the motion picture industry, and professional business services; a loss in temporary hires offset increases elsewhere in that sector.

Average hourly earnings rose 0.2% in April and were up 3.9% from a year earlier. That is the lowest monthly year-on-year increase since June 2021. Hours worked fell to 34.3 from 34.4 in March. That put a crimp on weekly earnings. When combined with the acceleration in inflation we saw in the first quarter, that provides context for souring consumer attitudes about the economy during the month. The bump in the minimum wage in fast food chains in California showed up as a 0.5% acceleration in wages among non-supervisory workers in leisure and hospitality; some 500,000 workers saw an increase from an effective rate of $17 per hour in March to $20 per hour in April.

Separately, the unemployment rate edged back up to 3.9%, but tied the 1960s for the longest span with unemployment below 4%. We have now seen 27 consecutive months of unemployment below 4%. Labor force participation remained unchanged at 62.7%, which is still well below the 63.3% peak of February 2020. Aging demographics and a surge in retirements are holding down participation in the overall labor market. Participation among those over 55 has been the hardest hit since the onset of the pandemic. Only those with a high school degree or less are rejoining the labor force in the over-65 crowd.

Prime-age participation rose to 83.5%, driven by a new record in participation by prime-age women. However, the US has gone from a leader in female participation to a laggard among its peers. Care responsibilities remain large obstacles to participation among women. The prime-age participation rate among men slipped to 89.1%, slightly below the level it was in February 2020. The participation rate among prime-age men peaked in the late 1950s. The only time we were able to see the prime-age participation rate among men reach pre-recession levels was in the wake of COVID, which was dubbed a “she-cession” for its disproportionate blow to jobs occupied by women in the service sector.

Those out on parental leave was the highest in April on record. The data goes back to 2003 and much of the increase is due to an expansion of parental leave benefits. Birth rates plummeted in 2023 after surging coming out of the pandemic. We could see another increase in 2024, given the surge in millennials in their thirties and forming households.  

The number of workers accepting part-time work for economic reasons rose slightly, while those working “voluntary part-time” plummeted. The number of multiple job holders remains close to the highs hit pre-pandemic. Multiple job holders have shifted from being a sign that labor markets are loose to tight in the 2000s. They tended to pick up, as unemployment fell and employers were more willing to work with conflicting schedules. Those working two full-time jobs fell to 393,000 on a twelve-month moving average, close to the post-pandemic peak. Many link the surge in two full-time jobs to remote work. However, we saw a similar rise late in the expansion of the 2010s and in the boom of the 1990s.

Those unable to work due to care giving responsibilities receded a bit from the record high of March but remained extremely elevated. People are leaning on their families to help as much as possible, which helps to explain part of the loss in participation among those over 55. At least a portion of the surge in school absences that we have seen since schools reopened is also due to childcare problems. Older siblings are staying home to watch younger siblings and enable their parents to go to work.

Hiring slowed in April but remains strong and labor markets remain tight. Hiring in healthcare and social services continued to climb, while hiring in leisure and hospitality and by state and local governments slowed. Job gains are becoming more dispersed and picking up where they were weak last year. The relay race to keep the job market humming continues. The moderation in wages and job gains will be a relief for the Federal Reserve, which prefers to hold rates higher for longer rather than hike to cool an overheating economy. The first rate cut is still expected in December.