A solid reading on April employment.
Nonfarm payrolls rose by 177,000 in April, above market expectations of about 130,000 (although downward revisions over the prior two months of 58,000 left the level of payrolls just below expectations). The U-3 unemployment rate was unchanged at 4.2 percent, while the broader U-6 slipped to 7.8 percent. Positively, the labor force participation rate rose to 62.6 percent, with the number of employed workers jumping by 436,000 in the household survey.
What are we to make of this in the new tariff world? First, the survey week was just after “liberation day” so it is unlikely that firms would have made significant (or any) changes just a week later. The May employment report will be a better indicator of the early impact of tariffs. But the labor market was solid heading into the tariff supply shock, which should help to bolster the economy (at least for a while). There was some weakness in federal government employment (down by 9,000), and this may get worse in coming months. Private-sector employment climbed a 167,000, with some modest weakness in autos (production and dealers) and manufacturing – but nothing outside of typical month-to-month volatility.
With all of the uncertainty around tariffs (off or on, higher or lower, sooner or later) and potential for economic harm (higher prices and slower growth) there is little evidence that it had much (or any) impact on the April employment report. Tariffs and the uncertain surrounding them should have some negative impacts on the job market starting with the May employment report. Still, firms may try to hold on to current employees longer than usual given the Covid experience of difficulty in re-hiring. This may keep the unemployment rate lower than usual in a slowdown, while still allowing for more usual payroll employment declines. But until we know what exactly will occur with tariffs, the net impact on the job market should be small, albeit negative. Better news on tariffs may allow the economy to escape a downturn and keep the job market strong – but worse news will likely cause firms to significantly slow their hiring. We are still some months away from know which way things will fall.
David W. Berson, Ph.D., CBE
Chief Economist
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