Job growth slowed to 175,000 in April, suggesting that the economy is returning to a stable, balanced rate of growth that could bring about lower interest rates and relief from inflation.

Unemployment has now been below 4% for 27 months in row, the longest stretch  since the 1960s, and the Black/white unemployment ratio is back down to 1.6, after ticking up to 1.8 in March.

While inflation remains above the Federal Reserve’s target of 2%, it is continuing to decline and wage gains have been outpacing inflation for more than a year. Average hourly earnings rose to $34.75, a 3.9% change over the year, while the Personal Consumption Expenditures Index was 2.8% in March, down from 4.4% a year ago.

Recent speeches by Fed chairman Jerome Powell and other members of the board of governors make clear their commitment to stay the course in implementing restrictive monetary policy until incoming economic data demonstrates sustained progress in reaching the 2% inflation target.

Elevated prices diminish the quality of life for many families, especially those in the low to middle income level. For example, high mortgage rates reduce new home sales and discourage home upsizing among homeowners. Depressed home sales generate the upward drift in residential rent by limiting the number of renters who become homeowners.

Four industries – health care, social services, transportation/warehouse, and retail accounted for 70% of total job growth. There was little employment change in other industries; leisure/hospitality, a major job creator in recent months gained only 5,000 jobs in April.

GDP grew 3.4% in the last quarter of 2023, but dipped to 2.5% in the first quarter or 2024. Economic growth is projected to remain at about 3% for the next two quarters but is expected to dip slightly in late 2024. Real wages, money wages adjusted for inflation, rose 4.1% year/year in March. That bolstered consumer spending, the key factor driving economic growth.

The economic data suggests a new normal in economic activity in the post pandemic world. The restrictive monetary policy adopted by the Federal Reserve in 2022 to reduce elevated inflation has had little impact in constraining economic growth or job creation. But there is uncertainty about the path forward in generating and maintaining stable, balanced growth.

It is difficult to determine how long it will take to maintain high interest rates in the effort to reduce inflation. All the policymakers signal caution in projecting when, how much, and how many rate cuts will be made in 2024.

The new normal in the post pandemic economy is accompanied by a modest decline in racial labor market disparities. The Black/White unemployment gap narrowed from the persistent 2:1 ratio to an average 1.65 during the last three quarters. Three developments explain the progress: (1) vigorous job creation and tight labor markets,(2) steady improvement in education among Black and Hispanic youth that improved their employability, and (3) increased labor force participation among Black and Hispanic adult women. These gains are threatened by the broadening opposition to DEI in the private and public sectors. Such regressive efforts will delay reaching the day when there is equal opportunity for all in American labor markets. That will be the day when the practice of America is aligned with the promise of America.