April jobs report likely to point to slowdown in hiring last month
U.S. job growth likely cooled markedly in April as rising interest rates and a slowing economy began to take a toll on hiring.
The U.S. Department of Labor’s high-stakes April payroll report is projected to show that hiring increased by 180,000 last month and that the unemployment rate inched higher to 3.6%, according to a median estimate by Refinitiv economists.
That would mark a drop from the 236,000 gain recorded in March and would be the weakest monthly payroll growth since December 2020, when the economy shed 268,000 jobs.
The Federal Reserve is closely watching the report for evidence that the labor market is finally softening after months of strong job gains as policymakers try to wrestle inflation under control. Although the consumer price index has cooled from a peak of 9.1% in June, it remains about three times higher than the pre-pandemic average.
A lower-than-expected figure on Friday could be a welcoming sign for the U.S. central bank, which approved the 10th straight rate hike on Wednesday afternoon before opening the door to a pause in the tightening cycle.
“After alluding to a pause, all eyes will focus on the labor market,” said Jay Woods, chief global strategist at Freedom Capital Markets. “It has been the one major sticking point in the Fed’s inflationary battle as unemployment remains at historical lows. While it tends to be a lagging inflationary signal, it is important for the Fed to see the labor market cool – now more than ever.”
The labor market has remained historically tight over the past year, but there are signs of a slowdown. A separate report released Wednesday showed that there were about 9.7 million job openings in March, the lowest level in two years.
However, job openings remain historically high. Before the COVID-19 pandemic began in early 2020, the highest on record was 7.6 million. There are still roughly 1.6 jobs per unemployed American.
There has also been a wave of notable layoffs over the past few months, and the list grows by the day. Amazon, Apple, Meta, Lyft, Facebook, Google, IBM, Morgan Stanley and Twitter are among the companies letting workers go.
“The April jobs report should confirm that the labor market slowdown is well underway and that the economy is cooling,” said Lydia Boussour, senior economist at EY.
Job losses could soon bleed into the broader labor market. Fed Chairman Jerome Powell has made it clear that policymakers anticipate job growth will slow and unemployment could climb as the Fed raises interest rates higher, but he has argued that an alternative where prices soar unchecked is worse.
For many economists, the possibility of unemployment rising has become a question of when, not if.
The central bank previously projected that the jobless rate will march substantially higher to 4.6% and remain elevated in 2024 and 2025 as steeper rates continue to take their toll by pushing up borrowing costs. That could amount to more than one million job losses.
Hiking interest rates tend to create higher rates on consumer and business loans, which slow the economy by forcing employers to cut back on spending.