The Zhitong Finance App learned that US employers cut their recruitment scale in April, and the unemployment rate unexpectedly rose. This indicates that the labor market is cooling down after experiencing strong growth at the beginning of the year.

According to a report released by the US Bureau of Labor Statistics on Friday, the number of non-farm payrolls increased by 175,000 last month, the smallest increase in six months and lower than the 240,000 expected by the market. The unemployment rate rose to 3.9%, higher than the forecast of 3.8%.

Friday's report further indicates that demand for employment is slowing, but these figures may not constitute what Federal Reserve Chairman Powell called an “unexpected weakness” requiring a policy response.

After keeping interest rates unchanged for the sixth time in a row this week, Powell said wage growth may require a “gradual decline” before policymakers can meet their inflation targets. Meanwhile, Friday's report showed that there have been some changes in this direction after a series of news released earlier this week indicating that wage pressure continues.

The average hourly wage increased 0.2% month-on-month and 3.9% year-on-year. This was the lowest growth rate since June 2021, and both figures were lower than expected. Some economists had anticipated that this increase might be stronger as a new law that came into effect in California on April 1 stipulating a minimum wage for workers in the fast food industry of $20.

After the report was released, US Treasury yields and the dollar fell, and stock index futures rose. The swap agreement revives expectations that the Federal Reserve will cut interest rates twice by 25 basis points in 2024. Traders have brought forward the forecast that the Federal Reserve will cut interest rates for the first time from November to September, and raised the possibility of cutting interest rates in September to more than 50%.

Olu Sonola, head of US economic research at Fitch Ratings, said in a report: “For those who expect the Federal Reserve to cut interest rates sooner or later, the slowdown in new jobs is good news, while the slowdown in wage growth is better news. One month does not constitute a trend, so the Federal Reserve may need to see this slowdown for several months, plus improved inflation data, before resuming interest rate cut plans as soon as possible.”

In terms of segmentation, employment growth in the leisure and hospitality industry, construction, and government sectors is slowing. There has been a decline in employment among car manufacturers and temporary service providers. Growth is concentrated in healthcare, transportation, and retail trade.

The labor market and a range of other economic indicators were strong in the first quarter of this year. The average number of people employed from January to March was 269,000, so Friday's data slowed significantly.

The total number of weekly employed persons combined with employment, working hours and income was the same as last month. This breaks three consecutive years of monthly growth, and if it continues, will increase the risk of falling consumer demand.

The gradual cooling of employment and wage growth is part of the reason policymakers say they are in no hurry to lower interest rates from 20-year highs. Powell also mentioned the increase in labor supply, particularly the influx of immigrants.

The labor participation rate — the proportion of the population working or looking for work — has stabilized at 62.7%. The unemployment rate for workers aged 25-54 rose to 83.5%, the highest level in 20 years. Increased participation rates will help curb wage growth.

After revising the data for the previous few months, the number of new jobs added in March was 315,000, an increase of 12,000 over the initial estimate; the number of new jobs added in February was 236,000, a decrease of 34,000.

Notably, the employment report consists of two surveys: one is an enterprise survey that produces employment and wage data, and the other is a smaller household survey that produces data on unemployment rates.

According to employment indicators published by the Household Survey, the number of employed people increased by only 25,000 in April, compared to a surge of nearly 500,000 last month. This may once again raise questions about why there is still such a big gap between this number and the number of people employed overall.