Job growth surprised again in April, this time rising more than expected. Total nonfarm payroll employment rose last month by 253,000 jobs, compared to March, according to data released Friday by the Bureau of Labor Statistics.
“Job growth for the prior two months was revised downwards, but on net, the labor market is stronger than expected, including wage growth up 4.4% over the past year,” Mike Fratantoni, the Mortgage Bankers Association’s chief economist, said in a statement. “This rate of growth is likely faster than would be consistent with the Federal Reserve’s 2% inflation target.”
The unemployment rate also fell slightly to 3.4%, with 5.7 million persons unemployed at the end of the month. Overall the unemployment rate has shown little net movement since early 2022.
“The unemployment rate fell and is now lower than it has been since 1953,” Lisa Sturtevant, Bright MLS’ chief economist, said in a statement. “The strong employment report adds to the complicated labor market picture, as it comes on the heels of this week’s JOLTS report that showed that the number of overall job openings fell as fewer people were switching jobs.”
With the resiliency of the job market and the continued wage growth, experts believe the Federal Reserve may not be done hiking interest rates just quite yet.
“The April data suggests that the Fed may not be able to pause interest rate hikes when they meet next month,” Sturtevant said. “And while the risks of a 2023 recession have increased, it is very likely that a downturn later this year would be mild, without significant job losses that often accompany economic recessions, given the current strength in the labor market.”
Sturtevant also said that she does not expect the housing market to take a major hit if labor market conditions weaken.
“The strength of most local housing markets is highly dependent on the local employment situation, and we’ve been seeing that relationship play out over the past several months,” Sturtevant said. “Even if the Fed increases the federal funds rate again next month, it is possible that mortgage rates could come down, with lingering uncertainty in the banking sector and declining consumer confidence pushing investors to safer investments, like U.S. Treasuries. Falling mortgage rates would provide more juice to the U.S. housing market, which has been relatively subdued this spring.”
The construction sector added 15,000 jobs in April, thanks to a large uptick in the specialty trade contractors segment of construction, which gained 26,700 jobs, with residential specialty trade contractors gaining 16,700 of those jobs. Meanwhile, residential construction of buildings lost 1,800 jobs and heavy and engineering construction lost 8,100 jobs, month over month.
““Despite declines in the number of single-family homes under construction, residential construction labor demand remains strong. Building a home does not readily lend itself to outsourcing and automation. Home building still requires manual labor as a key input into the production process,” Odeta Kushi, First American’s deputy chief economist, said in a statement. “There are still a near-record number of homes under construction, and you need more hammers at work to build these homes. Additionally, builders have had trouble attracting and retaining skilled construction workers, making them less likely to part with skilled workers.”
The real estate, and rental and leasing sector gained 9,800 jobs in April, with real estate gaining 8,700 jobs, and rental and leasing added 1,100 jobs.
In February 2020, a combined 300,000 were employed in “real estate credit” and as mortgage and non-mortgage loan brokers. As of March 2023, there were roughly 340,800 people in those jobs, suggesting that the industry still has a large number of cuts to make in the coming months as the housing market remains at a much cooler level than a year ago.
The lion’s share of the job growth in April came from gains in the professional and business services sector (up 43,000 jobs), the leisure and hospitality sector (up 31,000 jobs), the social assistance sector (up 25,000 jobs), and the health care sector (up 40,000 jobs).
“As was the case in recent months, job growth remains concentrated in just a few sectors, particularly health care and hospitality. Although we have seen several public layoff announcements, the job growth in these few sectors continues to offset losses in technology and other industries, including the mortgage market,” Fratantoni said. “A solid job market will provide support to the housing market. However, the inflationary pressures from this strong wage growth will likely prevent the Federal Reserve from cutting rates any time soon, even if they now are at the peak for this rate cycle.”