United States: unemployment drops to 3.4%, bad news for inflation

The job market in the United States rebounded unexpectedly in April, with job creations rising and the unemployment rate falling, far from the expected slowdown in the fight against high inflation. In April, 253,000 jobs were created, the Labor Department announced on Friday, compared to 165,000 in March – a figure revised down sharply.

Employment remains up in business services, health care, recreation and hospitality, as well as in social assistance, details the statement from the Department of Labor. As for the unemployment rate, it fell further, and fell to 3.4% (-0.1 point), as in January, its lowest level since 1969. Analysts had forecast 180,000 job creations and an unemployment rate at 3.6%, according to several consensuses.

A decline in job creation and a rise in the unemployment rate are however expected to manage to curb inflation. This, still very strong, had been fueled, among other things, by the significant growth in wages linked to the lack of manpower. Wages thus continued to climb in April, but a little more slowly. The increase in the average hourly wage is 4.4% over one year, to 33.36 dollars, against 4.6% last month.

"The data shows that the labor market remains tight and the economy continues to create jobs at a rapid pace," said Rubeela Farooqi, chief economist for HFE. This report “shows both strength and stability. Strength in the number of jobs added and stability in the diversity of where those jobs were added,” commented Robert Frick, economist for Navy Federal Credit Union.

Job creations in the private sector alone, published on Wednesday, had set the tone, defying forecasts, with 296,000 jobs created against 142,000 the previous month, according to the monthly ADP / Stanford Lab survey. The American central bank (Fed) is in the front line to fight against high inflation. It is she who must put an end to the overheating of the economy fueled by years of very low interest rates, which has led to this unprecedented rise in prices for 40 years.

For this, it has been raising its rates for a year. This leads the banks to, in turn, raise the cost of the loans they offer to households and businesses, to weigh on consumption and investment, and stop the escalation in prices. The Fed increased them again on Wednesday, after its monetary policy meeting, for the 10th time in a row.

“We are seeing some evidence of easing labor market conditions,” CEO Jerome Powell told a news conference at the time, “but overall you have a 50-year low unemployment rate. years". “The demand for labor still greatly exceeds the supply of available workers,” he also commented.

At the end of March, there were still nearly 9.6 million job vacancies, according to the Labor Department's JOLTS survey released Tuesday. It is, of course, in regular decline, but it remains at a very high level. However, while economic activity is slowing down under the pressure of rate hikes, but also of the recent crisis in the banking sector which is also restricting access to credit for households and businesses, a recession cannot be ruled out, and the unemployment is also expected to rise.

Nancy Vanden Houten, economist for Oxford Economics, thus anticipates a slowdown in employment growth linked to “a mild recession” to come, “the cumulative rate hikes and the tightening of lending standards weighing on the economy and the labor market in the second semester. The boss of the Fed, however, still believes that it is possible to escape it. And, if there is a recession, it could be mild, with unemployment rising "lower than what has been usual in modern-era recessions."