The nation’s job growth slowed in April to a pace below expectations, and the unemployment rate was slightly higher as the labor market appeared to cool in ways that could encourage the Federal Reserve to cut interest rates later this year.

The Labor Department said May 3 that the economy added 175,000 jobs during the month, significantly below most analysts’ consensus of 240,000, and the jobless rate edged up to 3.9% from 3.8% in March. The government said the jobless rate has stayed in a narrow range of 3.7% to 3.9% since August 2023.

The labor force participation rate — the measure of the population that is in the workforce — was unchanged at 62.7% in April.

The department says average hourly earnings rose by just 7 cents, or 0.2%, to $34.75. Over the past 12 months, earnings have increased 3.9%. Combined, that amounted to the slowest pace since June 2021.

“For those looking for a rate cut sooner than later, this deceleration in payroll growth is good news, and the weaker wage growth number makes it even better news,” Olu Sonola, Fitch Ratings’ head of U.S. economic research, stated in a press release. “However, one month does not make a trend, so the Fed will likely need to see a few months of this type of moderation, coupled with better inflation numbers, to put rate cuts back in play sooner than later.”

“The labor market right now is in a very sweet spot,” Joe Brusuelas, chief economist at RSM, told The Washington Post. “Employers are unwilling to let go of workers due to persistently strong aggregate demand.”

The government revised its job totals upward by 12,000 for March and downward by 34,000 for February, leaving the combined totals for those two months down 22,000 from the figures previously announced.

The department said the health care sector added 56,000 jobs in April. Health care has been a leader in employment gains, adding about 750,000 jobs during the past year. Other notable increases occurred in social assistance (31,000), transportation and warehousing (22,000), and retail (20,000).

The Federal Reserve left interest rates unchanged at its two-day meeting that ended May 1, stating in a press release afterward that it will not be appropriate to begin reducing the federal funds rate until the policymaking Federal Open Market Committee “has gained greater confidence that inflation is moving sustainably toward 2%.”

The benchmark rate is now in a targeted range between 5.25% and 5.5%, and has been there since July 2023.

Fed chairman Jerome Powell said after the meeting that a rate increase is unlikely, and he added that current Fed policy had made progress toward bringing inflation down to the central bank’s goal rate.

“Inflation is still too high,” he said during a press conference. “Further progress in bringing it down is not assured, and the path forward is uncertain.”

One of the things that is propping up inflation is wage pressures. The Labor Department said Tuesday that the employment cost index rose 1.2% during the first quarter. The index, which measures wages and benefits, rose at the fastest pace in a year.

This article was originally published in the June 2024 issue.