April Jobs Report
The labor market rebounded in April after a blizzard in early March resulted in a weak report in the prior month. The economy produced 211,000 new jobs in April, which was above the 190,000 estimate economists had expected for the month. Hiring was broad based across all major categories for the month. Consequently, the unemployment rate fell to 4.4% (from 4.5% in March), which is the lowest level since May 2007. The broader measure of unemployment which measures both full-time and part-time workers, the U6, also fell during the month to 8.6% (from 8.9%), the lowest level since November 2007. The economy has produced an average of 185,000 jobs per month so far in 2017, which matches the monthly average for 2016.
Wages continued to climb, although the 0.3% growth during the month was below economists’ expectations. Annual wage gains fell slightly as well, as wages grew 2.5% year-over-year versus 2.7% growth in the previous monthly report. Despite the slowdown in pace of growth, the uptick in wages supports consumer spending. This may result in a higher GDP figure for the Second Quarter relative to the 0.7% GDP figure for the First Quarter of 2017. In fact, Fed Chairwoman Janet Yellen recently stated that she believes the disappointing Q1 GDP figure was “temporary”.
Despite the slowing pace of wage growth, we see nothing in the latest labor market report to suggest that the Federal Reserve will alter their plan to raise interest rates either in June or later this year. Furthermore, market expectations remain high for a June rate hike, and Federal Reserve Board members have communicated that they expect at least two rate hikes this year. Therefore, we continue to expect the Federal Reserve will gradually raise interest rates as we move through 2017.
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