US jobs report for April will likely point to a slower but still-strong pace of hiring

WASHINGTON — The U.S. economy likely posted another solid workforce gain in April, showing it remains steadfast despite the highest interest rates in two decades.

The Department of Labor is expected to report Friday that employers added a healthy 233,000 jobs last month, up from a blistering 303,000 in March, but still a decidedly healthy total, according to a survey of forecasters by the data firm FactSet.

The unemployment rate is expected to remain at 3.8%. That would make it the 27th straight month with an unemployment rate below 4% – the longest streak since the 1960s.

The state of the economy is weighing on voters’ minds as the November presidential campaign intensifies. Despite the strength of the labor market, Americans generally remain irritated by high prices, with many of them blaming President Joe Biden.

Yet the U.S. labor market has repeatedly proven more robust than almost anyone predicted. When the Federal Reserve began aggressively raising rates two years ago to counter a punishing rise in inflation, most economists expected the resulting rise in borrowing costs to trigger a recession and push unemployment to a painful would drive to a high level.

The Fed raised its policy rate 11 times between March 2022 and July 2023, bringing it to the highest level since 2001. Inflation fell steadily as expected – from a year-on-year peak of 9.1% in June 2022 to 3.5%. % in March.

Still, the resilient strength of the labor market and the economy as a whole, fueled by steady consumer spending, has kept inflation consistently above the Fed’s 2% target. As a result, the Fed is postponing any consideration of rate cuts until it becomes more confident that inflation is steadily slowing toward its target.

So far this year, monthly job growth is averaging 276,000, up from an already solid 251,000 last year.

“If you look at the past few months, erring on the optimistic side has been a safe bet,” said Aaron Terrazas, chief economist at employment website Glassdoor.

That said, the labor market is showing some signs of eventual slowdown. This week, for example, the government reported that the number of vacancies fell to 8.5 million in March, the fewest in more than three years. Yet this is still a huge number of vacancies: before 2021, there were never more than 8 million monthly vacancies, a threshold they have exceeded every month since March 2021.

The number of Americans who quit their jobs — a figure that generally reflects confidence in finding a better position elsewhere — fell in March to the lowest level since January 2021.

A more stable workforce, Terrazas says, helps many companies operate more efficiently.

“When companies have large numbers of employees quitting,” he said, “it takes time to find and train new employees. It’s incredibly destructive at the corporate level.”

Now, “there are finally people who know what they are doing, know the processes, know the systems. You don’t have to waste a lot of resources on training.”

Economists have noted that hiring has recently been concentrated in three employment sectors: health care and social assistance; leisure and catering (largely hotels, restaurants and bars); and government. These three categories accounted for almost 70% of job growth in March.

More worryingly, progress on inflation has stalled, casting doubt on the likely timetable for Fed rate cuts, which would eventually lower the cost of mortgages, auto loans and other consumer and business borrowing. Most economists don’t foresee interest rate cuts before the fall at the earliest.

On a monthly basis, consumer inflation has not fallen since October. Annual inflation of 3.5% for March was still well above the Fed’s 2% target.

The central bank’s inflation fighters will keep an eye on Friday’s jobs report to see if there are signs the inflation picture is changing. From the Fed’s perspective, Terrazas says, “the best outcome we can hope for on Friday is slower but still solid wage growth, stable employment and, most importantly, easing wage pressures.”

Many economists say annual increases in hourly wages need to slow to around 3.5% to be consistent with the Fed’s inflation targets. That probably didn’t happen last month: Forecasters surveyed by FactSet predict hourly wages rose 4% from a year earlier, just below March’s 4.1% annualized increase.