Manufacturing Boosts US Hiring; wage growth is cooling

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  • Non-farm payrolls increase by 428,000 in April
  • Unemployment rate stable at 3.6%; turnout drops
  • The average hourly wage increases by 0.3%
  • Average workweek unchanged at 34.6 hours

WASHINGTON, May 6 (Reuters) – U.S. job growth rose more than expected in April as manufacturers boosted hiring, underscoring the economy’s strong fundamentals despite a drop in output in the first quarter .

Although the Labor Department’s closely watched jobs report released on Friday showed a moderation in wage gains last month, pressures on wage prices are expected to continue to build amid record job creation. About 363,000 people left the labor force in April, dropping the participation rate from a two-year high and potentially worsening labor shortages.

The Federal Reserve is trying to tighten monetary policy to bring down high inflation without tipping the economy into recession. The economy contracted in the last quarter under the weight of a record trade deficit.

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“Corporate payroll data is good as it confirms the labor market is strong and suggests the U.S. economy may be resilient enough to weather the next monetary tightening,” said strategist Seema Shah. Chief at Principal Global Investors. “For the Fed, nothing in today’s report suggests it can take the brakes off.”

The establishment survey showed non-farm payrolls increased by 428,000 jobs last month. But the economy created 38,000 fewer jobs in February and March than previously reported. It was the 12th consecutive month of job gains above 400,000.

Economists polled by Reuters had forecast the payroll to rise by 391,000 jobs. Estimates ranged from a low of 188,000 to a high of 517,000. Employment now sits 1.2 million jobs below its pre-pandemic level.

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The surge in hiring last month was led by the leisure and hospitality sector, which added 78,000 jobs. Restaurants and bars contributed 44,000 jobs to those gains, leaving employment in the industry 1.4 million below its February 2020 level.

Payrolls in the manufacturing sector rose by 55,000 jobs after increasing by 43,000 in March, indicating that demand for goods remains strong, which should help support consumer spending.

Employment in transportation and warehousing increased by 52,000 jobs, pushing it 674,000 above its February 2020 level. Employment in professional and business services also increased and now stands at 738,000 above its pre-pandemic level.

Employment in most industries is now at or above February 2020 levels, although health care and manufacturing are thousands of jobs away from reaching that milestone. The leisure and hotel sector still has a deficit of 1.4 million jobs.

The Fed raised its key rate by half a percentage point on Wednesday, the biggest hike in 22 years, and said it would start cutting its bond holdings next month. The US central bank began raising rates in March. Fed Chairman Jerome Powell told reporters that “the labor market is extremely tight and inflation is way too high.” Read more

Average hourly earnings rose 0.3% after advancing 0.5% in March. That brought year-on-year wage growth down to a still solid 5.5% from 5.6% in March, but did nothing to assuage fears of spiraling wage prices.

There were a record 11.5 million job openings on the last day of March, nearly double the 5.9 million people who were unemployed in April.

Compensation for U.S. workers posted its largest increase in more than three decades in the first quarter, helping to keep domestic demand buoyant.

“The combination of a tight labor market, ample job opportunities and rising prices gives workers significant leverage to negotiate higher wages,” said Sophia Koropeckyj, senior economist at Moody’s Analytics in West Chester. , Pennsylvania. “Therefore, the Fed’s success in slowing the economy and tempering wage and price pressures is of paramount importance.”

Although Powell said on Wednesday that a 75 basis point rate hike was not on the table, some economists believe the Fed could raise its benchmark interest rate above its neutral rate, which is estimated between 2% and 3%.

This fear continued to dominate investor sentiment. Wall Street stocks fell, extending a recent rout. The dollar

Details of the household survey from which the unemployment rate is derived were poor. Household employment fell by 353,000 jobs, the first decline since April 2020, following months of robust gains. Some economists saw the decline as a warning sign, while others said it was due to labor shortages.

The flow of people joining the labor force has all but dried up, with 363,000 exits. As a result, the unemployment rate remained unchanged at 3.6% in April. A total of 722,000 people entered the labor market in February and March.

“The fact that employment and the labor force moved together suggests that both declines were caused by difficulties in finding seasonal workers and therefore too much seasonal adjustment rather than layoffs,” said Chris Low. , chief economist at FHN Financial in New York.

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The labor force participation rate, or the proportion of working-age Americans who have or are looking for a job, fell to 62.2% from a two-year high of 62.4% in March . The drop came despite reports of retirees returning to the workforce due to the rising cost of living, with annual inflation rising at its fastest pace in more than 40 years.

Some economists said the biggest monthly drop in the participation rate since 2020 suggested that most prime-age workers who left during the COVID-19 pandemic had returned, while others pointed to beware of reading too much of the downside.

About 181,000 women aged 20 and over have left the labor force. Although the average workweek remained unchanged at 34.6 hours, total weekly hours rose 0.4% after being flat in March.

“The solid increase in hours worked at the start of the quarter suggests that GDP should rebound from last quarter’s pothole,” said Michael Feroli, chief US economist at JPMorgan in New York. “While financial conditions have tightened of late, the effect on aggregate demand and labor demand is unlikely to be felt until the second half of the year.”

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Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao

Our standards: The Thomson Reuters Trust Principles.

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