253,000 Jobs Added in April 2023, but Labor Force Participation Lags

The U.S. economy added 253,000 jobs in April, according to the U.S. Bureau of Labor Statistics, but the labor force participation rate remains troubling, say CEI analysts.

Sean Higgins, CEI research fellow:

“Friday’s Labor Department report that the economy gained 253,000 jobs in April, putting the unemployment rate down a notch to 3.4 percent, is further evidence that the economy has cooled. Bank failures and high inflation have not prevented the unemployment rate from dropping back down to its historic low of 3.4 percent; but competition for those jobs has tightened.

“The number of persons not in the labor force who currently want a job is 5.3 million, up by 346,000 over the previous month. Employers are still seeking to fill positions, but their need isn’t as acute, having hired more than a million people in the first two months of this year. The labor force participation rate remained at 62.6 percent in April, suggesting that those who’ve been holding out for better offers are abandoning that strategy.”

Joshua Bandoch, CEI research fellow:

“Even with plenty of worrying economic developments, Americans still aren’t returning to the workforce at rate’s we’d expect. Despite concerns over a potential recession, fewer job openings, bank collapses, and rising interest rates, the labor force participation rate remains at 62.6 percent, unchanged from March. So while payroll employment rose by 253,000 in April, the same proportion of Americans are working as in March. We’re just keeping pace. With 384,000 fewer job openings in March, there are signs that employers are pulling back on hiring, which won’t increase the likelihood that workers on the sidelines try to get back in.”

Ryan Young, CEI senior economist:

“From an inflation perspective, today’s labor news is good news. The Fed has raised interest rates by more than 5 percent over the last year in order to fight inflation. The tradeoff of higher interest rates is often a rise in unemployment, yet this tradeoff so far has been small. That should give the Fed the courage it needs to keep fighting inflation. The Fed is under intense political pressure to lower rates and stimulate the economy going into the next election.

“Today’s mostly-healthy labor market also speaks to the good health of the pre-COVID economy. Most of today’s economic problems are the result of Washington’s overreaction to the crisis, rather than underlying fundamental problems. That bodes well going forward, though we are by no means out of the woods.”