What happened: Total nonfarm payroll employment added 253,000 net jobs in April. The unemployment rate edged down to 3.4% from 3.5% last month. Annual growth in average hourly earnings increased to 4.4% in April from 4.3% in March.

What it means: April’s stronger-than-expected monthly increase was led by the education and health, business services, and leisure and hospitality sectors. Leisure and hospitality — a sector plagued by a more persistent decline in supply — is still 402,000 jobs below its pre-pandemic February 2020 level. Construction sector employment also grew in April after a small decline in March. 

What Zillow Senior Economist Orphe Divounguy thinks: On one hand, a strong labor market is good for home buying activity. On the other, if wage growth and core inflation remain stubbornly high, mortgage rates could head back up, along with the potential for more Federal Reserve rate hikes.

After raising interest rates by five percentage points in the past year, Federal Reserve Chairman Jerome Powell hinted at a potential pause this week, which would be a positive sign for home buyers rooting for mortgage rates to fall. However, today’s jobs data shows the labor market remained tight with wage growth heading in the wrong direction in April. The yield on the 10-year Treasury, which mortgage rates often follow, increased on the news.

The good news is that those who want a job are able to find one quickly. In addition, rent inflation — which tends to be most responsive to labor market tightness — is falling. Zillow’s measure of market rents fell to 5.3% annual growth in April, down almost 12 percentage points from the peak of 16.9%, the record-high pace reached in February 2022. Zillow’s rent index leads the rent components of the Consumer Price Index (CPI), which comprises roughly one-third of the total index, so the expected slowdown in CPI rent growth should help bring down inflation in the coming months. 

While today’s jobs report seems like a small setback on the battlefront against inflation, next week’s Consumer Price Index report will likely cause a bigger stir for bond yields and mortgage rates that tend to follow them.

Numbers to know: 

• In April, nonfarm employment increased by 253,000 jobs. Annual employment growth stalled at 2.6%. In a surprising turnaround, the construction sector added 15,000 jobs on net in April.
• The unemployment rate fell to 3.4% in April from 3.5% in March.
• Average hourly earnings increased 0.5% in April up from 0.3% in March. Annual growth in hourly earnings is up 4.4% year over year, up from 4.3% in March.
• Annual hourly earnings growth in leisure and hospitality fell to 5.7% from 6.1% last month. However wage growth in the sector remains high – a sign of persistent labor shortages.