Employment Growth is Slowing Down

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Following a 208,000 job gain in March, the economy generated just 160,000 jobs in April, which is consistent with the slowdown in economic activity in recent months. So far in this expansion, slowdowns in employment growth were just temporary setbacks in an otherwise rapidly expanding workforce.  We think this time is different. Employers are becoming more cautious as economic growth remains moderate and profits decline.

Still, employment growth is likely to remain strong enough to moderately lower the unemployment rate during the rest of 2016. The labor force participation rate dropped by 0.2 percentage points in April. After growing by 0.6 percentage points between September and March, some bounce back was to be expected. As the labor market continues to tighten, we expect more discouraged workers to join the labor force.

Today’s report provides more evidence that faster wage growth is taking hold in the U.S. labor market, with average hourly earnings increasing by 2.5 percent in the past 12 months.

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