The unemployment rate stayed at 4.2 percent in April, keeping it in the narrow 4.0-4.2 percent range it has been in since May of last year. The job growth in the establishment survey was also solid at 177,000, although the previous two months’ numbers were revised down by 52,000.

As in prior months, health care was by far the leading job gainer, adding 50,600 jobs. State and local governments continued to be big job gainers, together adding 19,000 jobs. It is important to remember that both the household and establishment surveys are carried out in a period that includes the 12th of the month, which means that they will almost completely miss the tariff-related disruptions that were starting to appear at the end of April – although they do pick up the impact of actions taken in anticipation of higher tariffs.

Wage Growth Continued to Slow in April

One signal of a weakening labor market is a slowing of wage growth. The year-over-year rate of wage growth slowed to 3.8 percent in April. The annualized rate of growth over the last three months was just 2.6 percent. This is consistent with the slower wage growth reported In the Employment Cost Index for the first three months of 2025. In a context where prices will be rising due to higher tariffs, many workers’ wages will not be keeping pace with inflation.

Share of Unemployment Due to Voluntary Quits Falls

Another piece of evidence of a weakening labor market is that the share of unemployment due to voluntary quits fell to 11.8 percent – very low for a 4.2 percent unemployment rate. This share averaged 13.1 percent in 2018-19.

The share was also low for several months in 2024. While the reluctance of workers to quit a job without another job lined up may be seen as evidence of weakness in the labor market, it can also be an indication of workers being content with their current job. That was more plausible in 2024 after the massive wave of job switching in 2022 and early 2023. That seems a less plausible explanation as we move further out from that time.

Black Employment-to-Population Ratio Falls

The unemployment rate for Black workers edged up to 6.3 percent, while employment-to population rate (EPOP) fell to 58.2 percent. This is the lowest level since March of 2022.

Unemployment Rate for Young People Rises

The unemployment rate for people between the ages of 20-24 rose to 8.2 percent in April. This brings the three-month average to 8.0 percent, the highest since the summer of 2021. For men, the rate was 9.6 percent, putting the three-month average at 9.3 percent. On the positive side, the EPOP for prime age workers rose 0.3 percentage points to 80.7 percent, bringing it back to January’s level. The unemployment rate for college grads also edged down to 2.5 percent, although this is still a historically high rate.

Health Care and State and Local Governments Continue to Lead Employment Growth

While the prospect of future cuts from the federal government may slow hiring in these sectors, there is no evidence of that in the data to date. The 50,600 jobs added in health care in April was almost exactly in line with its 52,000 average gain over the year to March. The 19,000 job gain in state and local governments was only somewhat below the 25,000 average of the year to March. There may be some slowing in the future if the impact of federal cuts seems more imminent, but we are not seeing it so far.

Construction and Manufacturing Both Show Some Weakness

We have been seeing some slower job growth in construction since the fall. The sector added 11,000 jobs in April but has added an average of just 7,000 jobs a month since September, compared to an average of 19,000 jobs a month in the year prior to September. Residential construction has changed little over this period, but there has been some weakening in non-residential construction.

Manufacturing employment fell by 1,000 in April, but the March number was also revised downward. The sector has been shedding jobs at a rate of 7,000 a month over the last year.

Tariff Anticipation Boosts Employment by Delivery Services and Warehouses

The delivery (couriers) and warehouse sectors both showed jobs gains in April, likely driven by stockpiling. The delivery sector added 8,400 jobs in April while the warehousing and storage sector added 9,800 jobs. Employment in the delivery sector had been virtually flat in the year up to October. In the six months since then it has added an average of 14,000 jobs a month. The warehouse sector also had been showing few job gains, but the job reported in April is consistent with the surge in inventory accumulations in the first quarter GDP report.

Job Growth Slowing in Professional and Technical Services

The pace of growth in the high-paying professional and technical services sector has slowed sharply in recent months. While the sector added 3,500 jobs in April, that just brought employment to 500 above its level in December of last year. It had been adding an average of 5,000 jobs a month in the year prior to December.

Restaurants Add 16,600 Jobs but Employment Still Below December Level

Restaurant spending is very much discretionary, so changes can tell us how people feel about their financial situation. Real spending declined in the first quarter, which is consistent with the employment picture in the sector. The April job growth was healthy but did not reverse declines in January and February. The April employment level was still 18,600 below the December level.

Positive Report with Some Signs of Weakness

The strong job growth in April and continuing low unemployment rate are both good signs about the labor market, but there are clear indications of weakening. The top item on the list is the slowing of wage growth. The monthly data are erratic and the wage numbers are subject to large revisions, so caution is warranted – but it does appear that wage growth has slowed.

The drop in the share of unemployment due to quits also suggests weakening in the labor market, as does the rise in the unemployment rate for young people. In a weak labor market, we would expect to see young people just getting out of school to be the hardest hit.

It is also important to remember that this is in effect the calm before the storm. For the most part, we are not seeing the effect of tariff induce price increases or shortages. That will appear in the May report.