The economy added 263,000 jobs in April, a sign that employment is still expanding solidly after a slight blip in February that might have pointed to weakness earlier this year.
The unemployment rate fell to 3.6 percent, which was unfortunately accompanied by a drop in labor force participation. As a result, the unemployment rate fell for the “wrong” reasons—more people leaving the labor force as opposed to getting a job. The overall labor force participation rate (LFPR) has dropped 0.2 percentage points for two months running, and now sits where it was exactly a year ago at 62.8 percent. Turning to the prime-age population, which removes demographic concerns such as the aging of baby boomers, we see that prime-age LFPR and the employment-to-population ratio also ticked down slightly, though both remain above their levels from last year at this time.
Wage growth held steady at 3.2 percent, where it has hovered for the past nine months. That’s higher than much of the recovery, but still below the 3.5 percent level that would be consistent with the Fed’s targets for inflation and long-term potential productivity growth. Hopefully, as employment continues to rise, workers will see a sustained period of stronger wage growth, enabling them to claw back the labor share of corporate sector income that remains weak. Consistent with its recent thinking, the Federal Reserve announced Wednesday they will hold off raising interest rates any further, which should give the labor market a better chance to reach a full recovery.