Washington Despite high inflation and the war in Ukraine, the US job engine is still running at full speed. 428,000 new jobs were created in April, exactly the same number as in March, according to government figures released on Friday. Economists polled by Reuters had only expected 391,000 for April.
The separately determined unemployment rate remained at the previous month’s value of 3.6 percent – a level that is likely to come very close to the full employment target of the central bank Fed.
US President Joe Biden said he was pleased with the development and saw it as a credit to his government. At the same time, he admitted that there was still a lot to do. “There is no question that inflation and high prices are a challenge for families across the country, and fighting inflation is my top priority,” Biden said.
“The job engine in the USA is running and running. Since the beginning of 2021, the strong increase in employment has continued seamlessly. The labor shortage is still great,” says economist Bastian Hepperle from the private bank Hauck Aufhäuser Lampe. Even if there are signs of slower employment growth in the coming months, the central bank is likely to remain on its monetary tightening course.
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In view of the overheating tendencies on the job market and the very high inflation at the same time, the Fed recently made the largest interest rate hike in 22 years. Fed Chair Jerome Powell then admitted that the sharp rise in inflation was eating away at wages. It is therefore important to return to price stability, which the Fed places at an inflation rate of 2.0 percent. It also has a mandate to promote the conditions for full employment.
The situation on the US labor market is therefore being closely monitored on the financial markets. “At the moment, the majority of stockbrokers do not trust the Fed to be able to fight inflation and save the economy from a violent crash at the same time,” said Thomas Altmann from the investment advisor QC Partners. According to experts, many expected that the fight against inflation would have priority for the Fed and that larger interest rate hikes could follow in the coming months than the increases of half a percentage point suggested by Powell.
Hourly wages are rising less than inflation
A new surge in energy prices as a result of the Ukraine war has led to consumer prices rising by 8.5 percent, the fastest rate in over 40 years. As described by Powell, this reduces purchasing power. Hourly wages rose by 5.5 percent in April compared to the same month last year. But the increase on Americans’ payslips is by far not enough to compensate for the high price increases, for example at the gas pump or in the supermarket.
“Job growth remains high. In addition, there are still over 11.5 million vacancies, which indicates an unchanged robust demand for employees,” according to Commerzbank economists Christoph Balz and Bernd Weidensteiner. This demand draws from an increasingly empty pool of available workers, which should keep wage pressure high: “There is still no clear evidence that the overheated labor market is cooling down.”
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