The U.S. economy added a robust 428,000 new jobs in April

In April, the U.S. economy added 428,000 new jobs, beating market expectations. KPMG Senior Economist Ken Kim offers his three key takeaways from the report.

Kenneth Kim

Kenneth Kim

Senior Economist, KPMG US

+1 212-954-6144

Video transcript

KPMG Senior Economist Ken Kim provides his analysis on the April jobs report.

Springing to life: U.S. adds 2,100,000 new jobs in only four months

2.1 million people found new jobs in the first four months of 2022. This is an exceptional pace of job creation given that historically, in a good year, employment grows by 2 million an entire year. In April, 428,000 new jobs were added, which eclipsed the expected increase of 380,000.  

Economic health: Employment gains are another positive indicator

Employment gains across industries were strong.  Leisure and hospitality added 78,000 new jobs in April compared to 100,000 in March.  However, the standout sector was manufacturing, which added 55,000 new jobs in April, surpassing not only the 43,000 jobs added in March, but also the six-month average of 44,000. Since the manufacturing sector is a leading barometer for the health of the U.S. economy and consumer demand, these figures indicate the economy is still performing well, despite the challenges of higher inflation and rising interest rates.

Peculiarities: Labor force participation went down while wages moderated

Although lower labor force participation typically results in more intense wage pressure, this dynamic was not reflected in April’s jobs report.  

The labor force participation rate declined to 62.2% in April, down from 62.4% in March and below the 62.3% rate reported in February. While the slow pace of return to a pre-pandemic participation rate was expected, the decline was not. The decline indicates there is a subset of the population that has decided to delay returning to the labor market. 

At the same time, despite the drop in labor force participation, wages zigged when they should have zagged.  Although firms are clearly facing stiff competition for workers in a diminishing labor pool, they did not respond by raising wages.  Instead, there was a slight moderation in wage growth, slowing to 5.5% in April from 5.6% in March, although it should be noted that this rate is still above the 5.2% reported in February.

The take-away: Positive signs for the economy

This dichotomy between labor force participation and wages could potentially be a good sign for the economy as it could lower the possibility of an incipient wage-price spiral.  Should the moderation in pay continue, it would help rectify the demand/supply imbalance in the economy and, perhaps, moderate the possibility of aggressive interest rate hikes by the Fed in the second half of 2022.