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April Jobs Report Shows Solid 428,000 Gain, Slowing Wage Growth, Stoking 'Soft Landing' Bets

Slowing wage growth, as well as a solid jobs gains, suggest the Fed might be able to deliver the 'soft landing' for the U.S. economy predicted by Jerome Powell earlier this week.

Updated at 8:56 am EST

The U.S. economy added modestly more-than-expected new jobs last month, the Labor Department said Friday, while wage growth eased suggesting the Federal Reserve's efforts to stabilize the employment market with higher interest rates are starting to bear fruit.

The Bureau for Labor Statistics said 428,000 new jobs were created in April, with headline unemployment rate holding at post-pandemic low of 3.6%. The April tally was just ahead of the Street consensus forecast of 395,000.

The BLS also revised its March jobs addition tally lower, to 428,000 from its original estimate of 431,000. February totals were revised lower, also, to 714,000 from 750.00.

The BLS noted that wages rose 0.3% on the month, and up 5.5% on the year to $31.75 per hour, a figure that will possibly ease concerns over the pace of wage inflation and its extended impact on the so-called second round' inflation effects against surging food and energy prices. Analysts had expected a month-on-month increase of around 0.4%

The April Employment Report has something for everyone: steady job gains supporting economic growth with less wage pressure, possibly easing inflation fears," said John Lynch, CIO for Comerica Wealth Management in Charlotte, North Carolina. 

"Investors need confidence that the Fed won’t raise too aggressively and topple the economy into recession in their fight against inflation," he added. "Today’s report is balanced and may prove to dampen the extreme volatility of recent days."

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U.S. equity futures extended earlier declines following the data release, with contracts tied to the Dow Jones Industrial Average indicating a 160 point opening bell dip and those linked to the S&P 500 priced for a modest 25 point move to the downside.

Benchmark 10-year Treasury note yields bumped to 3.067% while the dollar index, which hit a fresh 20-year high of 104.04 in overnight trading, to 103.409.

The figures, however, belie one of the most complicated labor markets in U.S. history, marked by a record rate of jobs quits over the month of March, and data showing some 11.55 million positions remain unfilled in the world's biggest economy.

Those numbers seem difficult to square with the fact that around 93% of the jobs lost during Covid have been recovered, suggesting a near-term slowdown in hiring later this year. Or, as has been evidenced by companies such as Amazon  (AMZN) - Get Amazon.com, Inc. Report, Target  (TGT) - Get Target Corporation Report and Starbucks  (SBUX) - Get Starbucks Corporation Report, significant wage increases will be needed to temp recalcitrant workers back into the labor force

"Wages are running high, the highest they’ve run in quite some time. And they are one good example of—or good illustration, really—of how tight the labor market really is, the fact that wages are running at the highest level in many decades," Federal Reserve Chairman Jerome Powell told reporters in Washington earlier this week following the central bank's 50 basis point rate increase, the largest in 22 years. 

" "We think, through our policies, through further healing in the labor market ... that supply and demand will come back into balance and that, therefore, wage inflation will moderate," he added. "I would say I think we have a good chance to have a soft or softish landing, or outcome."