Non-farm employment exceeds expectations but salary growth slows, easing market concerns about interest rate hikes this year.

After experiencing nearly a year of fluctuations, the US labor market is now showing clearer signs of stabilization. The latest data released by the US Bureau of Labor Statistics on Friday showed an increase of 115,000 in nonfarm employment in April, a significant drop from the unusually strong 185,000 in March but well above the market's expectation of 65,000. This marks the first consecutive monthly growth in US employment in nearly a year. The unemployment rate remained unchanged at 4.3% for the second consecutive month, further confirming that with limited labor force growth, mild employment growth is sufficient to maintain stability in the job market. Stabilization in employment coexists with structural differentiation, as wage growth slows down while underlying indicators release complex signals. Dan North, Senior Economist for Allianz North America, stated, "I carefully examined this report looking for flaws, but this month's data is almost impeccable. The overall numbers are not astonishing, I believe they still indicate a mild cooling in the labor market, but not a collapse." Looking at specific industries, employment growth shows structural differentiation. The healthcare industry continued to be a major driver, adding 37,000 jobs; transportation and warehousing added 30,000, retail added 22,000, and the social assistance sector contributed 17,000 jobs. The construction and leisure and hospitality industries also saw growth for the second consecutive month, with analysts attributing this partly to the demand for construction labor driven by data center construction. However, the tech industry continues to face challenges. Due to large tech companies cutting jobs to offset hefty spending in artificial intelligence, the information services industry saw a decrease of 13,000 jobs in April, marking the 16th consecutive month of job cuts. Since November 2022, the industry has cut a cumulative total of 342,000 positions, a decrease of 11%. There was also a slight decline in manufacturing employment. The wage data in this report was lower than expected, alleviating some concerns about spiraling inflation. Average hourly earnings in April rose 0.2% on a month-on-month basis and 3.6% year-on-year, both below the market's expectations of 0.3% and 3.8%, respectively. Despite the moderate wage growth, actual take-home incomes of workers were supported to some extent due to an increase in average weekly hours worked. It is worth noting that the "household survey" section of the employment report revealed underlying challenges in the labor market. A broader unemployment rate index including part-time workers and discouraged job seekers climbed to 8.2%, the highest level this year. This was mainly due to a significant increase of 445,000 in the number of people forced to work part-time for economic reasons, bringing the total to 4.9 million. Meanwhile, the labor force participation rate dropped to 61.8%, hitting a new low since October 2021, and household survey employment data declined for the fourth consecutive month. Looking back at the data from the previous two months, the revised results were mixed: job additions in nonfarm employment in March were slightly revised upwards by 7,000, but the data for February was further revised downwards, from an initial reported decrease of 92,000 jobs to a decrease of 156,000 jobs. Other labor market data released this week mostly pointed to "stability," with initial jobless claims remaining low and ADP research data showing that April was the best month for hiring in over a year. Federal Reserve officials are facing an unusual level of disagreement on monetary policy. While job cuts remain at their lowest levels in decades, economists increasingly see the slowdown in hiring as a major factor in the cooling of the labor market. Despite strong hard data, sentiment indicators show that both manufacturing and service industry hiring plans are weak. Last week, the Federal Reserve voted 8-4 to keep the benchmark interest rate unchanged, the highest number of dissents since 1992. While officials largely agreed on the decision to maintain the interest rate, there were differences in how the communication on policy direction should be handled. Officials who dissented generally believed that the next step could be either a rate hike or a rate cut, depending on how the situation evolves. Furthermore, the situation in Iran and concerns about tariffs have added complexity to policy-making. With former Federal Reserve Governor Kevin Warsh awaiting confirmation by the Senate, it is expected that a new Fed chair will soon be appointed. The market widely expects that due to the challenging balance between a high-flying economy and a resilient labor market (despite a noticeable slowdown in hiring compared to previous years), interest rates will remain unchanged for the year. According to the Chicago Mercantile Exchange's Fed Watch tool, the market currently predicts a 15.5% probability of a rate hike at the December policy meeting, while the probability of the Fed keeping rates unchanged has risen to 71.8%. The market reacted positively to this data. After the report was released, the three major US stock indexes rose in early trading, US Treasury bond yields remained low, and the US dollar weakened.