Not that long ago, U.S. payroll growth of less than 100,000 or so a month meant the labor market was sinking and signaling a potential recession. No more, though, as that kind of number is pretty much all that is needed to keep unemployment steady and the Federal Reserve at bay.
When the Bureau of Labor Statistics releases its job count for April on Friday morning at 8:30 a.m. ET, it’s expected to show a gain of just 55,000 — anemic compared with what the economy has seen in recent years, but enough to keep the jobless rate at a relatively low 4.3%.
The picture in total is one of a labor market that, while undoubtedly cooling, is generally stable and resilient despite a number of challenges.
“The headline message remains similar to previous employment reports, if anything, accentuated though,” said David Tinsley, senior economist at the Bank of America Institute. “The labor market momentum in terms of payrolls has really turned solid.”
The degree of stability, though, is in relative terms.
Against muted expectations, job gains totaled 178,000 in March, the best month since December 2024. But that still left the 12-month average at just 22,000. Excluding healthcare, the economy has seen a net loss of jobs.
Gains flow to the top
Understanding the current labor market requires looking beyond the headline numbers, said Tinsley, who referenced the popular K shape used to describe current economic conditions where benefits of prosperity are weighted toward top earners.
“It’s a really interesting set of kind of divergences across the economy. The overall picture seems to us quite solid, both in terms of wages and payrolls, but lots of Ks,” he said. “There’s lots of divergence in this economy right now, even though the headline looks solid.”
One area he cites particularly is wage growth.
Average hourly earnings are projected to have risen 3.8% annually in April, though that doesn’t tell the story of where the gains are flowing.
Bank of America’s deep well of data shows that in April, the top one-third of earners saw 6% after-tax wage gains while the bottom group showed a gain of 1.5%. That’s a particularly painful statistic considering that the consumer price index rose 3.5% through March, indicating that low earners saw a net loss of income.
“Just beneath the surface, distributions matter a lot here,” Tinsley said.
The economist further pointed out that hiring disparities are popping up regarding business size, with small businesses seeing declines over the past three months.
The Fed’s reaction
The crosscurrents are presenting challenges to Fed policymakers who have grown increasingly split over the direction of interest rate policy.
Earlier this week, New York Fed President John Williams noted the “conflicting signs” between data such as weekly jobless claims showing stability even as consumer sentiment surveys point to a softening picture.
“Much of the hard data points to stabilization, while some of the soft data suggest continued gradual slowing,” Williams said.
“Together, these indicators suggest increasing labor market slack,” Williams added, using a term synonymous with a softening labor market. “Although this dissonance in the hard and soft data may reflect the effects of a low-hire, low-fire labor market, it bears continued close monitoring for signs that conditions are shifting.”
Investors are betting that the labor market’s relative stability, combined with elevated inflation, will keep the Fed on hold through the year. Williams repeated his position that he sees monetary policy as “well-positioned” for the current climate.
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