US added 428,000 jobs in April despite surging inflation

Washington, May 7 (BNA): America’s employers added 428,000 jobs in April, extending a strong hiring streak that has defied punishing inflation, chronic supply shortages, Russia’s war against Ukraine and much higher borrowing costs.

Friday’s jobs report from the Labor Department showed employment last month kept the unemployment rate at 3.6%, just above a half-century low, the Associated Press reported.

Employment gains in the economy have been remarkably consistent in the face of the worst inflation in four decades. Employers added at least 400,000 jobs for 12 consecutive months.

Meanwhile, April’s job growth, combined with steady wage gains, will boost consumer spending and likely keep the Federal Reserve on track to raise borrowing rates sharply to fight inflation. The US stock market fell again on Friday on concern that labor market strength will keep wages and inflation high and increase heavy borrowing costs for consumers and businesses. High loan rates, in turn, can weigh on corporate profits.

“With labor market conditions continuing to strengthen — including very rapid wage growth — we doubt the Fed will abandon its hawkish plans,” said Paul Ashworth, chief US economist at Capital Economics.

The latest employment figures contain some cautionary notes about the labor market. The government revised its estimates of job gains for the months of February and March with a total cut of 39,000 jobs.

The number of people in the workforce fell in April by 363,000, the first decline since September. Their exit led to a slight decrease in the percentage of Americans working or looking for work from 62.4% to 62.2%. Many industries have slowed down due to labor shortages. The nation still has 1.2 million jobs shy of the number it had in early 2020, before the pandemic hit the economy.

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“We need these people back,” said Beth Ann Bovino, chief US economist at S&P Global.

Bovino noted that some Americans remain on the sidelines of the workforce due to ongoing concerns about COVID-19 or because of the difficulty of finding affordable daycare for unvaccinated children.

Meanwhile, employers continue to distribute wage increases. Hourly wages rose 0.3% from March to April and 5.5% from a year ago. However, prices are rising faster than wages.

“Yes, we have seen a rise in wages,” Bovino said. But with inflation hitting a 40-year high, “people are still under pressure.”

Recruitment spread across industries last month. Factories added 55,000 jobs, the most since last July. Warehouses and carriers added 52,000, restaurants and bars 44,000, healthcare 41,000, finance 35,000, retailers 29,000, and hotels 22,000. Construction firms, slowed by a shortage of labor and supplies, added just 2,000.

However, it is unclear how long the job boom will last. The Federal Reserve this week raised its key interest rate by half a percentage point – its biggest move since 2000 – and signaled more significant rate hikes ahead. As the Fed’s interest rate increases come into effect, spending and hiring will become increasingly costly.

In addition, the huge economic aid that the government was providing to families has expired. The Russian invasion of Ukraine helped accelerate inflation and clouded the economic outlook. Some economists warn of a growing recession risk.

At the moment, labor market resilience is especially striking when set against the backdrop of accelerating price increases and rising borrowing costs. This week, the Ministry of Labor provided further evidence that the labor market is still thriving. She reported that only 1.38 million Americans were collecting traditional unemployment benefits, the lowest number since 1970. She said employers hit a record 11.5 million jobs in March and that layoffs remained well below pre-pandemic levels.

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Moreover, in the economy there are now, on average, two jobs available to every unemployed person. This is the highest percentage recorded.

And in another sign that workers have extraordinary clout in the labor market, 4.5 million people quit their jobs in March, visibly confident they might find a better opportunity elsewhere.

Chronic shortages of goods, supplies and workers have contributed to skyrocketing prices – the highest inflation in 40 years. The Russian invasion of Ukraine in late February greatly worsened the financial situation, sent global oil and gas prices soaring, and severely blurred the national and global economic picture.

The Federal Reserve, which most economists say has been too slow to recognize the risk of inflation, is now raising interest rates aggressively. Its goal is known with difficulty: the so-called soft landing.

“Trying to slow the economy enough, without causing a recession,” said Rubella Farooqui, chief US economist at High Frequency Economics. “Their track record on that is not particularly good.”

Giacomo Santangelo of job research firm Monster is among economists who say they think a recession is coming. However, Santangelo said, the Fed “doesn’t have a lot of options” other than raising interest rates to combat rising inflation.

Currently, many entrepreneurs, especially in industries such as retail and hospitality, are still struggling with a tight job market.

David Cohen is one of them. Since opening White Mountain Tavern in Lincoln, New Hampshire, in August 2020, Culhane has raised his starting hourly wage from $12 to $15. However, he still was unable to bring his number of employees to the 15 he needed. He worries he won’t have enough people to handle the summer tourism season.

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His labor shortage is costly. With a full staff, Culhane can serve as many clients as he can now. Meanwhile, food and electricity prices are rising.

In response, Culhane has had to raise the prices of some menu items by as much as 50%. He now priced an 8-ounce steak with Parmesan truffle fries and asparagus at $25, up from $17.

In his opinion, he had no choice.

“With (inflation) going up, and if we don’t adapt to that, we won’t,” he said.

To fully achieve the levels of employees they need, some companies may have to do more than just raise wages.

“Employers and business leaders will need to push salary increases even further to win the war on talent,” said Karen Fishuk, CEO of Randstad North America recruitment firm. “It will mean responding to new cultural norms and differences between generations.”

She said many young people want jobs that provide an attractive work-life balance, prioritize diversity and provide the opportunity to make a positive difference in society.

Among those who would benefit from more flexible working arrangements is Grace Rosenback of Mountain Air, New Mexico. The freedom to work from home — a necessity during the pandemic — has proven to be a boon for Rosenback.

After undergoing a heart transplant in 2019, Rosenbach, now 49, had to take a year off work. She works as a presentation designer for marketing firms and other businesses, works remotely for a contractor and hopes to land a full-time job with the client company once the four-month contract expires.

The business world, she said, “has pretty much accepted that everyone is away.”

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