While the unemployment rate rose slightly in April, from 4.26 percent to 4.34, the U.S. economy added jobs at a rate that exceeded expectations last month. The Department of Labor reported the economy added 115,000 new jobs in April according to a May 8 report. That number far exceeded the forecasted 67,000 jobs economists expected for the month.
Jobs are being added rapidly in the retail, transportation and warehousing and healthcare industries according to the U.S. Bureau of Labor Statistics. These are strong signs indicating companies are preparing for consumers to spend again.
Healthcare saw the largest boom, with the economy adding 37,000 new health care jobs, slightly exceeding the average monthly gain of 32,000 over the past prior 12 months. Major gains occurred in nursing and residential care facilities (15,000 jobs) and home health care services (11,000 jobs) according to the report.
Transportation and warehousing also saw a significant increase in April, adding 30,000 new jobs as companies ship and store products.
Retail added 22,000 new jobs in April and those jobs occurred across the warehouse, general merchandizing, building material and garden equipment industries as companies gear up for a busy spring and summer.
Despite these healthy signals, the impact of the war with Iran is beginning to ripple through the labor market. The Strait of Hormuz remains closed and fuel prices remain elevated, increasing the cost of doing business and beginning to take a toll on job growth.
Resolving the conflict with Iran and reopening the strait is proving difficult, with the Iranian government threatening on May 12 to enrich uranium for nuclear weapons after President Trump said Monday that the month-long ceasefire was on “life support”.
Without the Iran conflict, the economy would likely be doing a lot better than it is with the impact of elevated fuel prices. Economists are admitting the labor market is improving, though some note that the Iran conflict leaves a question mark hanging in the air over economic growth.
Nicole Bachaud, a labor economist at the jobs site ZipRecruiter, told the Washington Post on Friday that the labor market is warming up, but the Iran conflict presents a “big asterisk”, in the long-term employment outlook.
“We’re starting to see the labor market warming back up a bit, and so that will start to redistribute the balance across other industries, with the big asterisks of how the Iran war and changes in gas prices are going to influence industries,” Bachaud said.
Chief U.S. Economist at Bloomberg Anna Wong noted that hiring in April was “surprisingly robust”, and confirmed that the strong signals in manufacturing indexes and surveys are being supported by job growth numbers.
“April hiring was surprisingly robust…”, Wong said. “The most interesting detail in April’s jobs report is from the area that powered more than half the month’s job gains: the freight sector. That confirms the improvement flagged by recent strong readings in PMIs and regional Fed manufacturing surveys: A strong recovery may be underway in the industrial sector.”
This quiet manufacturing boom has only been growing over the past few months, despite the conflict with Iran.
In April, the manufacturing index for the Federal Reserve Bank of Philadelphia experienced its fourth consecutive increase, rising from 18.1 in March to 26.7 in April. Another index, the Institute for Supply Management’s Manufacturing PMI also expanded for the fourth consecutive month in April.
According to survey responses to the Institute for Supply Management’s April survey, demand is up but oil prices are tempering those demands. “Demand for manufactured goods is trending higher versus last year”, one respondent said. “However, geopolitical uncertainty and rising oil and diesel prices continue to weigh on demand. Many customers are exercising caution and remain in a wait-and-watch mode.”
What this indicates is a complex web of factors at play economically. On the negative side of the equation, unemployment rose slightly in April, and inflation jumped up to 3.8 percent annual growth according to the latest data compiled by the U.S. Bureau of Labor Statistics. That is not a good combination.
However, new jobs in April exceeded economists’ predictions significantly. On top of that, manufacturing indexes are indicating higher demand, but fuel costs are tempering that demand.
The economy wants to bounce back, but the key issue preventing a stronger recovery is the geopolitical conflict with Iran. A peace deal needs to be negotiated that does not allow Iran to pursue nuclear weapons but also reopens the Strait or Hormuz. These are two demands that the United States needs Iran to agree to for a lasting peace deal. If a deal is reached with Iran and fuel prices decline, economic data indicates that the U.S. is posed to step into a quiet manufacturing boom.
Manzanita Miller is the senior political analyst at Americans for Limited Government Foundation.
