The U.S. economy added 428,000 jobs in April as hiring remained too strong for the Federal Reserve. While the unemployment rate held at 3.6% and wage growth was a bit tamer, the strong aspects of the report seemed more convincing. The Dow Jones industrial average opened lower after Thursday's thrashing.
Private-sector payrolls rose 406,000 in April, while government jobs rose 18,000.
Wall Street had expected the April jobs report to show a gain of 400,000 jobs, including 390,000 in the private sector. Job gains for February and March were revised down by 39,000. The initially reported gain of 431,000 jobs in March was revised to 428,000.
The average hourly wage rose 0.3% on the month vs. expectations of 0.4%. Annual wage growth of 5.5% from a year ago was largely in-line with forecasts, and cooled slightly from March's 5.6%.
While wage gains are strong, they're not keeping up with inflation. The annual CPI inflation rate hit 8.5% in March.
Dow Jones, Treasury Yields React To Jobs Report
Soon after the jobs report release at 8:30 a.m. ET, Dow Jones futures turned positive. But shortly after the opening bell, the Dow Jones had fallen about 1.3% in Friday's stock market action. The S&P 500 lost 1.4% and the Nasdaq 1.9%.
Despite aggressive Federal Reserve tightening announced on Wednesday, the stock market surged as investors bought into chair Jerome Powell's belief that policymakers can rein in inflation without tipping the U.S. economy into a recession — or triggering a prolonged bear market.
Yet confidence in those benign outcomes was fleeting. On Thursday, the Dow Jones tumbled 1,063 points, or 3.1%. The S&P 500 sank 3.6% and the Nasdaq 5%. As of Thursday's close, the Dow is 11% below its all-time record closing high. The S&P 500 has lost 14% from its peak, and the Nasdaq 24%.
On Wednesday, Powell spoke about the imbalance between labor supply and demand, with the labor force about 5 million workers short of filling job needs. That's contributing to the strongest wage growth in many years.
The first step to achieving Powell's sanguine outlook is for the Fed to keep the jobless rate from continuing to fall. April's report was positive on that score, but for not entirely credible reasons, explained below.
After the jobs report, the 10-year Treasury yield initially eased, but then rose 4 basis points to 3.11%, after shooting past 3% on Thursday to the highest level since 2018.
Be sure to read IBD's The Big Picture column after each trading day to get the latest on the prevailing stock market trend and what it means for your trading decisions.
Jobs Report Details
The leisure and hospitality sector added 78,000 jobs. Factory employment grew by 55,000.
Construction jobs rose by just 2,000. Health care and social assistance payrolls rose 41,000. Retailers added 29,000 jobs. Transportation and warehousing jobs rose 52,000.
The breadth of hiring remained strong with the diffusion index holding at 71.3%. That reflects the share of industries that added jobs and half of the industries in which employment was stable.
Unemployment Rate
The household survey, which is used to derive the unemployment rate, was at odds with the employer survey, showing that the ranks of the employed fell 353,000. The number of people participating in the labor force, meaning they're working or actively looking for a job, fell 363,000.
The Fed wants to see labor force participation increase, not fall. Plus, the household survey is based on a smaller sample that comes with a higher margin of error. That's why Wall Street may have discounted its results.
The share of the working age population (age 16 and up) participating in the labor force surprisingly fell to 62.2%.
According to the monthly survey of households, 5.9 million Americans are unemployed. That compares to 5.8 million unemployed in February 2020.
Please follow Jed Graham on Twitter @IBD_JGraham for coverage of economic policy and financial markets.
