EconoFACTS

May 06, 2022 | 09:07

U.S. Employment: Record Hiring Streak Continues

Economist

Senior Economist and Director
Economics

Sal Guatieri is a Senior Economist and Director at BMO Capital Markets, with over two decades experience as a ma... (Read more)

Sal Guatieri

Senior Economist and Director
Economics

Sal Guatieri is a Senior Economist and Director at BMO Capital Markets, with over two decades experience as a ma... (Read more)

For a record 12th straight month, U.S. nonfarm payroll gains topped 400k amid broad strength across industries. Payrolls also exceeded expectations, rising 428,000 in April, matching the prior month's slightly downwardly-revised increase. Though down from February's 714k blowout print, the current pace of job growth is still more than double the long-run norm. With a record 11.5 million job vacancies to fill and payrolls still down 1.2 million (or -0.8%) from pre-pandemic levels, job growth is likely to stay strong in the near term, at least until rising interest rates begin to bite into demand. The April jobs increase was led by leisure and hospitality (which is still 1.4 million jobs short of February 2020 levels) and, surprisingly, by manufacturing, despite the ongoing supply challenges plaguing the sector.

The household survey was less inspiring than the establishment report, however. Employment fell 353,000 after a string of monster gains. And the labour force shrank about as much due to an unwelcomed 0.2-pt pullback in the participation rate after some recent encouraging advances. This kept the unemployment rate at 3.6%, a tick above the pre-virus level.

There was some better news on wages, with average hourly earnings up a more moderate 0.3%, trimming the yearly rate to a still-high 5.5% (though not high enough to keep up with inflation).

Aggregate work hours rose 0.4% after a flat March, and are up 2.7% annualized from Q1. That's consistent with our 2.6% call for Q2 real GDP growth, assuming some further sag in productivity.

Our jobs report scorecard prints a grade of 67.5, the lowest in a year but still well above the passing mark of 50.

Bottom Line: American businesses are still eagerly hiring despite all the uncertainty about inflation, interest rates, the war in Ukraine, and lockdowns in China. However, job growth is bound to slow along with the economy as the Fed ratchets up interest rates to try to control inflation. Policymakers will take some modest comfort from the steady jobless rate and softer earnings in this report, but it knows that labour demand is still far too strong and market conditions too tight to be consistent with price stability. The FOMC is on track for at least another 50-bp hike in June pending further inflation news.

Table 1 - United States — Employment

(change in thousands)

Source: BMO Economics, Haver Analytics