Wages are rising, but can't keep up with cost of living — and could worsen inflation
ARI SHAPIRO, HOST:
We got some good news and some not-so-good news about the job market today. Employers are adding a lot of jobs, and wages are going up at a rapid pace. But those wage gains are not keeping pace with the high cost of living, and there's a danger that rising wages will make inflation even worse. NPR's Scott Horsley joins us with details on today's jobs report. Hey, Scott.
SCOTT DETROW, BYLINE: Hi.
SHAPIRO: Job growth has been really strong for some time now. What stands out about April's numbers?
DETROW: That's right. U.S. employers added more than 400,000 jobs for the 12th month in a row in April. It's been a really remarkable string of gains. That's more than double the average number of jobs we were adding in the year before the pandemic. Last month saw lots of hiring in factories, in restaurants and warehouses. Hotels added 22,000 jobs in April. Bharat Patel is a second-generation hotel owner in Sarasota, Fla. He says hotels need more front desk clerks and housekeepers because a lot more people are traveling right now. And so more of his rooms are booked.
BHARAT PATEL: Rates are through the roof. People want to travel. And so instead of going abroad or - they're really enjoying the beaches and the national parks and state parks. And, you know, people just want to get out.
DETROW: Like a lot of employers, Patel says he's boosting wages to attract the workers he needs. Average wages in April were up 5.5% from a year ago. So this remains a really hot job market. In fact, it's a little too hot for the inflation watchdogs at the Federal Reserve.
SHAPIRO: Why too hot? What is the Fed worried about?
DETROW: The Fed's concerned that employers are going to pass these costs of higher wages along in higher prices. And that could make inflation, which is already at a 40-year high, even worse. That's why this week the Fed raised interest rates by half a percentage point in hopes of cooling off inflation. The Fed also telegraphed additional similar-sized rate hikes could be in store in June and July.
SHAPIRO: And how will rising interest rates affect the job market?
DETROW: Well, the rising cost of borrowing is designed to temper demand. And we might be getting a sneak preview in the housing market. The average cost of a home mortgage has jumped sharply in anticipation of the Fed's actions. It's now above 5.25%. And Robert Dietz, who's chief economist with the National Association of Home Builders, says the industry is feeling that pinch.
ROBERT DIETZ: The housing market is definitely slowing at this point. The rise in mortgage rates has harmed housing affordability, particularly for prospective first-time buyers. It's not just the rate itself, but it's the down payment.
DETROW: Now, Dietz doesn't expect a collapse in housing. But, you know, construction companies added only 2,000 workers last month, which is a big slowdown from the months before. Some other businesses that thrived during the pandemic, like Amazon and Clorox, have also reported a slowdown in their need for workers. And this is kind of what the Fed wants to see throughout the economy - some cooling of demand and inflation but not so much cooling that it tips the economy into recession.
SHAPIRO: So on balance, was this a good jobs report?
DETROW: It was. It was very good. The unemployment rate held steady at 3.6%. That's the lowest since the start of the pandemic. Unemployment among African Americans and Latinos actually declined. One disappointing piece in this report, though - the labor force actually shrank in April after big gains in February and March. You'd like to see the labor force growing to provide some additional breathing room in what remains a very, very tight labor market.
SHAPIRO: That's NPR's chief economics correspondent Scott Horsley. Thank you.
DETROW: You're welcome. Transcript provided by NPR, Copyright NPR.