Businesses have record job openings, but it’s hasn’t been easy to hire because of a shrinking pool of available workers and an unprecedented number of people quitting. Still, the U.S. likely added another big clump of new jobs in April.
Here’s what to watch in the employment report on Friday morning:
Plenty of hiring
The number of new jobs the U.S. created in April likely decelerated to 400,000, according to a poll of economists by The Wall Street Journal.
By comparison, the economy gained an average of 561,000 jobs in the first three months of 2022.
Still, a hiring gain that matches Wall Street’s forecast would leave the U.S. just 1.2 million jobs below its pre-coronavirus peak of 152.5 million.
The economy is on track to soon recover all 22 million jobs lost in the first month of the pandemic, based on a survey of business establishments. But hiring is all but certain to slow. A pair of ISM surveys, for example, indicated that it’s gotten even harder for businesses to find and retain employees.
“Job growth remains solid in the spring of 2022, although the tight labor market is making it more and more difficult for businesses to find workers,” said chief economist Gus Faucher of PNC Financial Services.
expects the U.S. unemployment rate to fall another tick, to 3.5% from 3.6%, and match the pre-pandemic low in 2020. Two years ago the jobless rate slid to the lowest level since 1968.
If unemployment falls below 3.4%, it would mark the smallest rate since 1953.
One caveat: The low unemployment rate stems in part from fewer people being in the labor force compared to a few years ago. Retirements soared early in the pandemic and some younger workers haven’t returned, especially women with children.
Federal Reserve response
The tightest labor market in decades is great news for workers and a headache for businesses. The Federal Reserve has a different worry: that rising wages might add to the highest U.S. inflation in 40 years.
The central bank plans to raise interest rates sharply to curb inflation, potentially slowing the economy — and hiring, too.
Good or bad, the April employment report won’t change the Fed’s calculus.
Millions of workers who left the labor force early in the crisis are gradually returning, but not fast enough to ease the labor crunch or the upward spiral in wages.
High inflation could force more people to look for work, economists say. So too could the recent decline in the stock market or the ebbing pandemic.
The share of the working-age population in the labor force rose in March to a pandemic peak of 62.4%, but it’s still a full point below the pre-covid high. That’s the equivalent of 1.6 million missing workers.
Employees are enjoying the biggest wage gains in four decades, especially job hoppers taking advantage of the tight labor market. Average pay has shot up 5.6% over the past year to $31.73 an hour.
Economists forecast another sizable 0.4% increase in wages in April.
The problem is, wages aren’t keeping up with inflation. The cost of living has jumped almost 8.5% in the past year, leaving most workers worse off. And now the worry is that higher wages will also feed the fires of inflation.