WASHINGTON– The U.S. economy likely posted another solid increase in hiring in April, demonstrating continued durability in the face of the highest interest rates in two decades.
The Labor Department is expected to report Friday that employers added 233,000 jobs last month, up from 303,000 in March, but that remains 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 consecutive month with an unemployment rate below 4%, the longest such streak since the 1960s.
The state of the economy is weighing on voters’ minds as the November presidential campaign heats up. Despite the strong job market, Americans generally remain exasperated by high prices, and many blame President Joe Biden.
Yet the U.S. labor market has repeatedly proven more robust than almost everyone predicted. When the Federal Reserve began aggressively raising rates two years ago to combat a brutal inflationary surge, most economists expected the resulting rise in borrowing costs to cause a recession and pushes unemployment to painfully high levels.
The Fed raised its benchmark rate 11 times between March 2022 and July 2023, bringing it to its highest level since 2001. Inflation has steadily slowed as it was expected to, from a one-year high from 9.1% in June 2022 to 3.5%. % in March.
Still, resilient strength in the job market and the economy as a whole, fueled by steady consumer spending, has kept inflation persistently above the Fed’s 2% target. As a result, the Fed is delaying any consideration of interest rate cuts until it is more confident that inflation is gradually slowing toward its goal.
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 last couple of months, it’s a safe bet to err on the optimistic side,” said Aaron Terrazas, chief economist at the jobs website Glassdoor.
That said, the job market is showing signs of slowing. This week, for example, the government announced that job openings had fallen to 8.5 million in March, the lowest figure in more than three years. However, this still represents a large number of vacancies: before 2021, monthly job offers had never exceeded 8 million, a threshold that they have now exceeded every month since March 2021.
The number of Americans leaving their jobs – a figure that generally reflects confidence of finding a better position elsewhere – fell in March to its lowest level since January 2021.
A more stable workforce, Terrazas said, helps many businesses operate more efficiently.
“When companies see large numbers of workers quit,” he said, “it takes time to find and train new workers. It’s incredibly destructive at the company level.”
Today, “there are finally people sitting down who know what they are doing, know the processes, know the systems. You don’t need 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 hospitality (mainly hotels, restaurants and bars); and the government. These three categories accounted for almost 70% of employment growth in March.
More worryingly, progress against inflation has stalled, raising doubts about the likely timing of Fed rate cuts, which would ultimately reduce the cost of mortgages, auto loans and other consumer and business loans. Most economists don’t envision any rate cuts until after the fall, at the earliest.
Month over month, consumer inflation has not declined since October. The 3.5% year-over-year inflation rate for March was still well above the Fed’s 2% target.
The central bank’s inflation fighters will be watching Friday’s jobs report for any signs that the inflation picture could change. From the Fed’s perspective, Terrazas said “the best outcome we can hope for Friday is slower but still solid payroll growth, stable employment and, most importantly, a slowdown in wage pressure “.
Many economists say annual hourly wage increases 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 shy of the 4.1% year-over-year increase recorded in March.
ABC News
