Home Society U.S. labor market remains unexpectedly strong: hourly wage increase could fuel inflation

U.S. labor market remains unexpectedly strong: hourly wage increase could fuel inflation

The US labor market was tighter in april than economists had expected. Employers hired more people than in the previous month, while economists, on the contrary, expected a decrease in the number of new jobs. U.S. unemployment remained unchanged at a low level, while on the contrary, it settled on a slight increase.

In total, 253,000 new jobs were added in the United States last month, far more than economists had expected on average. Of the labor force, 3.4 percent were out of work, the U.S. government reported. The forecast was an increase to 3.6 percent.

Hourly wages rose by an average of 4.4 percent in a year. Analysts, on the other hand, had expected an increase in hourly wages on an annual basis of 4.2 percent. The increase in hourly wages on a monthly basis was also higher than expected. This could be a factor that continues to fuel US inflation.

Importantly, the Bureau of Labor Statistics revised the job growth figures for February and March downwards. The increase in the number of jobs turns out to have been a lot less significant over these two months, than the statistics office of the US Department of Labor initially reported. According to analysts at ING, the positive signal of job growth should therefore be viewed with a certain degree of caution in the first estimate in April.

The labor market appears to remain fairly strong based on the new numbers, while other signs point to a deteriorating economy.

The US gross domestic product (GDP) rose much less sharply in the first quarter than in the previous three months. Interest rate hikes further make it much more expensive for companies to borrow money for investment. In addition, the fall of some medium-sized US banks caused unrest around the financial sector, which may have an impact on the economy.

The job figures are also important for the Federal Reserve’s interest rate policy. Now that the labour market remains tight, this may be a reason for the dome of central banks to continue raising interest rates a little longer to combat high inflation.

About the author: Rick Culpepper

Rick Culpepper is of those journalists who dig the topic to the very bottom. He is often late with the delivery of the piece, but always does it perfectly. In his spare time, he collects data for one of the most high-profile investigations of corruption in the EU.

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