The upcoming April jobs report is poised to test the narrative of a resilient US labor market, with forecasts pointing to the weakest hiring in over a year.
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US Jobs Report Preview: Economists See Hiring Cool to 57,000
(P1) The U.S. labor market is facing a pivotal moment, with the April jobs report on Friday expected to show a significant slowdown in hiring to just 57,000 net new jobs. This comes after a mixed picture in March, where job openings held steady at 6.87 million but hiring saw its best month since February 2024, according to the Labor Department.
(P2) "This picture of the labor market will change as the economy adjusts to $100+ a barrel oil, higher inflation, possibly tighter monetary conditions and global recession starting in Asia," Carl Weinberg, chief economist at High Frequency Economics, wrote in a commentary on the recent data.
(P3) The March Job Openings and Labor Turnover Survey (JOLTS) showed openings were largely unchanged from February's 6.92 million, while gross hiring improved to 5.55 million. More Americans also quit their jobs, a sign of confidence. However, the forecast 57,000 net jobs for April, surveyed by FactSet, would represent a sharp deceleration from the 178,000 jobs created in March and bring the unemployment rate to a still-low 4.3%.
(P4) A significant slowdown could influence the Federal Reserve's path on interest rates, potentially easing concerns about an overheating economy. The break-even rate to keep unemployment from rising is now estimated to be as low as 15,000 jobs a month, according to the Federal Reserve Bank of St. Louis, giving the central bank more leeway as it battles inflation.
March Data Shows Underlying Shifts
While job openings have trended down from their peak of 12.3 million in March 2022, the details of the March JOLTS report painted a more nuanced picture than the headline number suggests. The increase in gross hires was notable, with significant gains in sectors like transportation, warehousing, and utilities (+108,000) and professional and business services (+165,000). This suggests that despite a cooling in overall demand for new workers, firms are still actively bringing people on board.
The ratio of job openings to unemployed workers, a key metric for labor market tightness, stood at 0.95 in March. This is a significant normalization from the post-pandemic peaks but remains a focus for policymakers looking for signs of slack. The gradual rise in layoffs, though still below pre-pandemic levels, also points to a labor market that is slowly rebalancing after years of high-interest rates and economic uncertainty.
April Report Carries High Stakes
All eyes are now on Friday's April employment report. A number close to the 57,000 consensus would confirm that the labor market is entering a cooler phase, potentially giving bond markets a boost on expectations of a more dovish Fed. A surprisingly strong report, however, could reignite inflation fears and send Treasury yields higher, pressuring equities.
Economists will be watching not just the headline nonfarm payrolls (NFP) number but also wage growth and the labor force participation rate for a complete picture. The combination of these factors will be critical for the Federal Reserve's next move, with the next policy meeting scheduled for June.
This article is for informational purposes only and does not constitute investment advice.
[1] The job market is starting to show glimmers of good news with some solid data this week. The real test will come with the April jobs report on Friday.[2] Private payrolls rose by 109,000 in April, topping expectations, ADP says[3] U.S. job openings largely unchanged in March despite Iran conflict[4] US job openings drop in March; hires increase sharply[5] Job Openings Inch Lower In March
