The US economy adds 253,000 jobs in a sign of a strong labor market

US job growth was stronger than expected in April, showing the economy’s resilience even as the Federal Reserve signaled it was “close” to pausing the cycle of rate hikes.

The United States added 253,000 non-farm payrolls last month, according to a report from the Bureau of Labor Statistics on Friday, confounding expectations of a slowdown.

The main increase in jobs was partially offset by downward revisions to the previous two months’ data, but the unemployment rate and wage growth figures also indicated continued malaise in the labor market, raising doubts about whether the Fed will start cutting rates soon. As investors expected.

The two-year Treasury yield, which moves according to interest rate expectations, jumped to session highs immediately after the data was released. It increased 0.15 percentage points on the day, at 3.94 percent. Futures market traders – who prior to the report had priced in the possibility of a rate cut as soon as July – have cut their bets.

“This report paints a picture of a hot labor market, and that doesn’t justify a rate cut,” said Eric Winograd, chief fixed income economist at Alliance Bernstein.

The unemployment rate fell to 3.4 percent last month, compared to expectations of 3.6 percent. Hourly wage growth boosted 0.5 percent month-over-month, and rose 4.4 percent year-on-year.

James Bullard, president of the Federal Reserve Bank of St. Louis, said the job market remains “very tight” and that it will take time for demand to subside.

“Rumors of the impending collapse of the economy are greatly exaggerated,” he said during Friday’s event. He added that reducing inflation would not require a sharp rise in the unemployment rate.

Job growth in April was particularly strong in professional and business services, while employment in the healthcare, leisure and hospitality sectors expanded strongly.

Employment was stronger in areas that have experienced a labor shortage for some time or are less economically sensitive, said Jack Janasiewicz, portfolio manager at Natixis Investment Managers, while growth was weaker in more interest rate-sensitive areas such as retail and manufacturing.

Wages are an important factor in inflation, particularly in the services sector, so economists and investors have been watching the numbers closely for indications that higher interest rates were slowing the economy and lowering inflation.

The data comes after the US central bank announced on Wednesday its 10th consecutive rate hike, raising the benchmark federal funds rate to a range of 5 to 5.25 percent. Federal Reserve Chairman Jay Powell said the labor market remains “unusually tight,” but added that “there are some signs of supply and demand . . . returning to a better balance.”

Data released earlier this week supported Powell’s assessment, showing a sharper-than-expected drop in employment opportunities to the lowest level since April 2021. However, Friday’s figures are the latest reminder that inflationary pressures remain elevated.

Powell stressed on Wednesday that it will take time to bring inflation down toward the Fed’s 2 percent target, but investors have been betting that the central bank will shift interest rates quickly, with the first coming in July.

“The job market is still resilient — wage growth is falling, but you can make the argument that it’s not fast enough . . . the probability is still slim, but I don’t think you can write it off and say further hikes are completely off the table,” Janasiewicz said.

Investors will be scrutinizing the release of more economic reports next week to determine whether the Fed will follow through with a pause.

“It would be very foolish to raise interest rates,” said David Kelly, chief global strategist at JPMorgan, citing his concerns about worsening banking turmoil. “I think they were foolish to push them up the way they did.”

The Fed’s quarterly survey of chief loan officers due on Monday will provide insight into how the collapse of several regional banks will affect willingness to lend elsewhere, while Wednesday’s consumer prices report will indicate whether the Fed’s efforts to tame inflation are paying off. fruits.

If the Fed ends up surprising people in June [with a rate rise]”It’s very unlikely to be a reaction to the employment numbers and more likely to be a reaction to the inflation numbers,” said David Donabedian, chief investment officer at CIBC Private Wealth.

“We still think we will see recessionary conditions unfold at some point [the] second half of the year. . . But the market has been priced in very quickly in terms of the extent of the Fed’s pivot.”