The U.S. labor market is throwing off two very different signals — and they're coming from the same report.
At first glance, April looked like another solid month. Employers added jobs for the second straight time above expectations, total payrolls climbed to a record 158.7 million and the unemployment rate held steady at 4.3 percent. But a closer read of the Labor Department's data, as analyzed by Reuters, points to something less reassuring. Hiring is concentrated in a handful of sectors, workforce participation is slipping and millions of Americans appear to be quietly exiting the job market.
The disconnect comes down to how the government tracks employment. One survey asks employers how many people are on payrolls, while another asks households who is actually working. Right now, those two measures are telling increasingly different stories.
On the employer side, the picture still looks strong. Payroll employment has reached a record 158.7 million, with gains of 304,000 so far this year — a sign of continued resilience even as inflation and geopolitical tensions create uncertainty.
The household survey tells a different story. It shows total employment has fallen by 1.37 million since the start of the year. At the same time, the labor force is shrinking. About 700,000 fewer people were participating in the workforce in April compared to a year earlier and roughly 1.55 million have dropped out since late 2025 — a decline surpassed only during the sudden shock of the COVID-19 shutdowns.
That helps explain why the unemployment rate hasn't moved much. When fewer people are working or even looking for work, the headline number can stay flat while underlying conditions weaken.
The participation rate — a key measure of how many people are engaged in the labor market — has now fallen for five straight months and is sitting at its lowest level since the mid-1970s, outside of the pandemic.
Policy is playing a role as well. Immigration restrictions under President Donald Trump have reshaped workforce dynamics after years in which immigrant workers drove much of the growth. Early gains in participation among native-born workers have faded, leaving overall participation lower.
Even the job gains that are showing up are narrowly concentrated. Healthcare continues to do most of the heavy lifting, adding 37,000 jobs in April, roughly in line with its recent trend. Transportation and warehousing added 30,000 jobs, boosted by hiring in courier services, while retail trade contributed 22,000.
Beyond those areas, the momentum fades. Manufacturing lost 2,000 jobs in April, reversing gains from the previous month and leaving the sector well below where it stood when Trump returned to office. Financial activities shed 11,000 jobs, the information sector cut 13,000 and federal government employment declined by 8,000.
That unevenness matters. Job growth is still happening, but it's not broad-based. The Labor Department's diffusion index — which measures how widely hiring is spread across industries — shows only a slight tilt toward expansion, while the longer-term trend points to narrowing growth.
Other data points suggest the labor market may be softening under the surface. The number of people unemployed for less than five weeks jumped by 358,000 to 2.5 million in April, a sign of an uptick in layoffs. At the same time, 1.8 million people — about one in four unemployed workers — have been out of work for more than six months.
Underemployment is also rising. The number of people working part-time because they can't find full-time jobs increased by 445,000 to 4.9 million.
Put it all together, and the picture is less straightforward than the headline numbers suggest. Payrolls are growing and unemployment is steady, but fewer people are participating; overall employment is declining by some measures and job gains are concentrated in a limited number of industries.
In other words, the labor market is holding up — but it's far from booming.
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