Indications of a potential slowdown in hiring hint that the April employment report might not be as strong, although Wall Street remains optimistic. Experts are forecasting another significant surge after substantial growth in the initial quarter of the year.
Keep an eye out for the upcoming U.S. jobs report set to be released on Friday morning.
The weather prediction
It is anticipated that the economy will see a growth of 240,000 jobs in the month of April. Despite the historical significance of this increase, it would still be the smallest gain in five months.
Since December, the economy has been consistently adding an average of 280,000 new jobs each month.
According to senior economist Lydia Boussour of EY Parthenon, the upcoming April jobs report is expected to indicate a slight slowdown in the labour market, with a decrease in employment gains. However, she also predicts that job creation will continue to be strong.
It is impressive to see how the labour market has remained resilient despite a significant rise in interest rates, which usually has a dampening effect on hiring and economic growth.
Signs of weakness?
Surveys conducted among business leaders at both large (ISM) and small (NFIB) companies indicate a potential decrease in hiring. In March, the number of job openings experienced a decline, reaching its lowest point in three years.
The majority of recent hiring has been focused on three specific sectors: government, healthcare, and leisure and hospitality. That’s quite different from a few years ago, when the majority of industries were actively recruiting.
Even with a minimal number of job cuts, April could see a significant rise in the number of new jobs created. Despite a decrease in hiring, a reduction in layoffs could result in a positive employment figure that grabs attention.
Unemployment rate
The projected unemployment rate for Americans actively looking for work is expected to stay at 3.8%, which is close to the lowest level seen since the 1960s. The unemployment rate has remained below 4% for a consecutive period of 26 months.
Job cuts, to put it simply, continue to be at a remarkably low level. Companies are hesitant to reduce their workforce given the scarcity of qualified employees, particularly with the ongoing expansion of the economy.
The number of individuals seeking unemployment benefits has decreased to levels similar to those seen during the pandemic, currently remaining in the range of low 200,000s.
During economic downturns, the number of new claims tends to increase significantly, often surpassing 300,000.
Wage growth
Projected hourly wages are expected to increase by 0.3%, slightly surpassing the rate that aligns with the Federal Reserve’s preferences.
In a low-inflation climate, wages typically experience a monthly increase of 0.1% to 0.2%.
Bank of America predicts that wages may experience a more rapid increase, partly influenced by the recent rise in the minimum wage in California.
Pay increases over the past year are expected to slightly decrease to 4% from 4.1%, unless there is a significant impact from California.
Despite the sluggish growth in wages, the Federal Reserve is aiming for a further decrease in their rate of increase. The Federal Reserve considers annual wage increases of 2% to 3% to be consistent with maintaining low inflation.
