US economy sees healthy job growth in April as payrolls jump by 428,000

The U.S. economy saw solid job growth in April, suggesting the labor market is still strong despite headwinds from rising interest rates, soaring inflation, a worsening labor shortage and fears of a slowdown. 

Employers added 428,000 jobs in April, the Labor Department said in its monthly payroll report released Friday, beating the 391,000 jobs forecast by Refinitiv economists. It marked the 12th consecutive month that job gains topped 400,000. The unemployment rate, meanwhile, held steady at 3.6%, the lowest level since February 2020.

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Job gains were broad-based, with the biggest increases in the pandemic-battered leisure and hospitality industry (78,000), manufacturing (55,000), and transportation and warehousing (52,000).

The labor force participation rate, a key measure of the active workforce, fell 0.2 percentage points in April to 62.2%, matching the lowest level recorded this year as the labor force shrank by 363,000 workers.

"The job market continues to plow forward, buoyed by strong employer demand. After just over two years of the pandemic, the job market is remaining resilient and on track for a return to pre-pandemic levels this summer," said Daniel Zhao, senior economist at jobs review site Glassdoor. "However, the job market is showing some signs of cooling as it turns the corner and the recovery enters a new phase."

Businesses are eager to onboard new employees and are raising wages in order to attract workers as they confront a labor shortage. There were roughly 11.5 million open jobs at the end of March – the highest on record – while the number of Americans quitting their job has also climbed to a new high.

Millions of workers are seeing the largest pay gains in years, as companies compete with one another for a limited number of employees. Earnings rose 5.5% in April from the previous year, nearly double the pre-pandemic average of 3%. There are signs that growth could be moderating, with earnings climbing just 0.3% on a monthly basis, slower than Refinitiv expected.

Many of those gains have been eroded, however, by the hottest inflation in nearly four decades, which has pushed the price of everyday necessities like gasoline, clothing and food significantly higher. 

The rising prices have been bad news for President Biden, who has seen his approval rating plunge as inflation climbs higher. 

Inflation has also forced the Federal Reserve to move more aggressively. Central bank policymakers raised interest rates by 25 basis points in March and 50 basis points in May, and have signaled that more mega-sized hikes are on the table at coming meetings. Although there are growing fears that the Fed could inadvertently drag the economy into a recession with its tightening, Chairman Jerome Powell has argued the labor market and consumer demand are strong enough to prevent a downturn.

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Friday's data may bolster that argument and likely solidifies the central bank's charted rate hike course, according to John Lynch, chief investment officer for Comerica Wealth Management.

"Investors need confidence that the Fed won’t raise too aggressively and topple the economy into recession in their fight against inflation," Lynch said. "Today’s report is balanced and may prove to dampen the extreme volatility of recent days. We’re still not out of the woods, yet a clearing is visible."