The economy added a very robust 253,000 jobs in April, above economists’ expectations of around 175,000.
While this month’s report signals continued strength of the labor market, job gains for February and March were revised downward substantially by 149,000. The labor market was slightly cooler than we thought in the first quarter of 2023.
The 253,000 jobs added by employers in April signal that businesses remain confident in adding new positions, as well as backfilling open roles. April’s job gains bring the 2023 total to 1.1 million through just the first four months of the year, nearly matching the annual total projected by many economists. Job gains have certainly slowed, but April’s total is still above the pre-pandemic average of 200,000 jobs added per month.
Demand for Workers Continues to Slow
Despite job gains returning to a pre-pandemic level, the labor market is among the tightest in history, and the shortage of talent continues to prove challenging for many businesses.
Job openings are a key indicator of labor demand. And March’s job openings, reported earlier this week, showed signs that companies have continued letting up in terms of hiring plans.
Job openings decreased by nearly 400,000 to 9.6 million – the lowest level in nearly two years – but remain much higher than the 2015 to 2019 average of 6.4 million monthly job openings.
As demand for workers starts to moderate, we’d expect record wage growth to ease, but April’s jobs report shows 12-month wage growth held steady at 4.4%. LaborIQ is projecting wage growth to ease considerably throughout the year, ending 2023 at 3%-3.5%.
Layoffs Increase but Unemployment Remains at Historic Lows
Hiring is still fairly robust, and layoffs have not increased at the pace many projected. Layoffs did tick up in March by nearly 250,000 to 1.8 million, just below the 1.9 million monthly average layoffs before the pandemic.
And the unemployment rate ticked down to 3.4%, just under pre-pandemic lows. With 9.6 million job openings, and fewer than 6 million unemployed workers available to fill those open roles, there are 1.7 open jobs for each unemployed worker.
Our prediction for 2023 is that the labor market will continue moderating to historic norms. And slower job growth over the past two months could be a sign that the labor market is finally starting to cool.
Companies will need to watch the labor market and track compensation trends closely this year to stay competitive.