US adds 177,000 jobs in sign of resilience; unemployment steady at 4.2%

Business Standard

02-05-2025

American employers added a better-than-expected 1,77,000 jobs in April as the job market showed resilience in the face of President Donald Trump's trade wars.
Hiring was down slightly from a revised 1,85,000 in March and came in above economists' expectations for a modest 1,35,000. The unemployment rate remained at a low 4.2 per cent, the Labour Department reported Friday.
President Donald Trump's aggressive and unpredictable policies including massive import taxes have clouded the outlook for the economy and the job market and raised fears that the American economy is headed toward recession.
But Friday's report showed the damage isn't showing up in the labour market yet. The labour market refuses to buckle in the face of trade war uncertainty, Christopher Rupkey, chief economist at fwdbonds, a financial markets research firm. Politicians can count their lucky stars that companies are holding on to their workers despite the storm clouds forming that could slow the economy further in the second half of the year.
Transportation and warehousing companies added 29,000 jobs last month, suggesting that companies have been stocking up before essential, imported goods are hit with a wave of new tariffs, driving prices higher.
Healthcare companies added nearly 51,000 jobs and bars, restaurants almost 17,000 and construction firms 11,000. Factories lost 1,000 jobs.
Labour Department revisions shaved 58,000 jobs from February and March payrolls.
Average hourly earnings ticked up 0.2 per cent from March and 3.8 per cent from a year ago, nearing the 3.5 per cent that economists view as consistent with the 2 per cent inflation the Federal Reserve wants to see.
The report showed that 5,18,000 people entered the labour force, and the percentage of those working or looking for work ticked up slightly.
We are not seeing right now any really adverse effects on the employment market, Boston College economist Brian Bethune said before the report came out.
Yet many economists fear that the US job market will deteriorate if economic growth takes a hit from trade wars.
Trump's massive taxes on imports to the US are likely to raise costs for Americans and American businesses that depend on supplies from overseas. They also threaten to slow economic growth.
His immigration crackdown threatens to make it more difficult for hotels, restaurants and construction firms to fill job openings. By purging federal workers and cancelling federal contracts, Elon Musk's Department of Government Efficiency risks wiping out jobs inside the government and out.
Looking ahead, we expect the steep tariff increases and the surge in uncertainty and financial market volatility will result in a more pronounced labour market downshift than previously anticipated, Lydia Boussour, senior economist at the accounting and consulting giant EY, wrote this week. Large cuts to the federal workforce and the cancellations of many government contracts will also be a drag on payroll growth in coming months.
A slowdown in immigration will weigh on labour supply dynamics, further constraining job growth. We foresee the unemployment rate rising toward 5 per cent in 2025.
Trump's policies have shaken financial markets and frightened consumers. The Conference Board, a business group, reported Tuesday that Americans' confidence in the economy fell for the fifth straight month to the lowest level since the onset of the COVID-19 pandemic.
American workers have at least one thing going for them. Despite the uncertainty about fallout from Trump's policies, many employers don't want to risk letting employees go not after seeing how hard it was to bring people back from the massive but short-lived layoffs of the 2020 COVID-19 recession.
They laid millions of these people off, and they had a hell of a time getting them back to work, Boston College's Bethune said. So for now, the unemployment rate and the number of people filing claims for jobless benefits every week remain low by historical standards.
The federal government's workforce fell by 9,000 on top of 17,000 job losses in February and March, Still, the full effect of Musk's DOGE cuts may not be showing up yet. For one thing, Bethune noted, job cuts orders by the billionaire's DOGE are still being challenged in court. For another, some of those leaving federal agencies were forced into early retirement and don't show up in the Labour Department's count of the unemployed.
Solid hiring and low unemployment will likely keep the Federal Reserve on the sidelines as it takes time to evaluate the impact of tariffs on the economy. Fed chair Jerome Powell has underscored that the duties are likely to push up prices in the coming months, making the central bank wary of the potential for higher inflation.
The Fed typically fights inflation with higher interest rates, so it is unlikely to cut its key short-term rate anytime soon. It might change course and reduce rates if layoffs spiked and unemployment rose, but Friday's report suggests that isn't happening yet.