A job seeker carries a flyer at a job fair at Brunswick Community College in Bolivia, North Carolina, on April 11, 2024.
Allison Joyce | Bloomberg | Getty Images
Hiring likely continued at a rapid pace in April as investors look for cracks in the labor market that could influence the Federal Reserve.
Nonfarm payrolls are expected to show an increase of 240,000 people this month, according to the Dow Jones consensus, which also calls for the unemployment rate to remain steady at 3.8%.
If that top figure is correct, it would actually represent a small step back from the average of 276,000 jobs per month created so far in 2024. Moreover, such growth could contribute to the Fed's reluctance to cut rates, putting pressure on the labor market. inflation continues and is still above the central bank's 2% target.
“There is definitely still a tailwind,” said Amy Glaser, senior vice president of operations at staffing firm Adecco. “For April, the name of the game is steady: Eddie as resilience continues, and then we look forward to some of the seasonal trends we would expect to see in the summer.”
The labor market in April showed more strength in healthcare, leisure and hospitality, Glaser added. These have been two of the top sectors for employment growth this year, with healthcare adding around 240,000 jobs so far and leisure and hospitality contributing 89,000 jobs.
However, growth in the coming months could spread to areas such as education, manufacturing and warehousing, part of the usual seasonal trends as teachers look for alternative work in the summer and students look for work, she said.
“I don't expect any big surprises this month based on what I'm seeing on the ground,” Glaser said. “But we've been surprised before.”
Exceeding expectations
The job market has been full of surprises this year, beating Wall Street estimates at a time when many economists expected hiring to have slowed. The 303,000 increase in March exceeded forecasts and was part of a flood of data showing that the labor economy remains strong, wages continue to rise and inflation has not changed much after falling sharply in 2023.
That has pushed the Fed into a box, as officials are reluctant to cut rates until they get more convincing evidence that inflation is under control.
Policymakers will look at several pieces in tomorrow's report to see if there is evidence that job growth is not helping fuel price pressures.
If wage growth slightly exceeds expectations and wage pressures ease as more people enter the labor market, that would be an ideal scenario for the Fed, said Drew Matus, chief market strategist at MetLife Investment Management.
“The Goldilocks scenario is an increase in the unemployment rate with an increase in the participation rate,” Matus said. “What that suggests is that there is a little bit of weakness, which should translate into less wage pressure and take some of the concerns about continued high levels of inflation off the table.”
Investors beware
Markets will also keep a close eye on wage figures.
Consensus estimates put average hourly wage growth at 0.3% for the month, near March's trend, and the annual increase at 4%, or just below the previous month's 4.1%. However, Matus said the wage numbers could be skewed by immigration patterns and by California's minimum wage increase this year to $16 an hour.
Fed Chairman Jerome Powell said Wednesday that wage pressures have eased over the past year as the labor market has achieved a better balance between supply and demand.
“Inflation has fallen significantly over the past year, while the labor market has remained strong, and that is very good news,” he said at his press conference after the central bank's latest meeting. “But inflation is still too high.”
Markets are roiling as uncertainty over the Fed's rate path has increased, although Wall Street was in rally mode on Thursday, the day before the Bureau of Labor Statistics report dropped at 8:30 a.m. ET.
“What you see in the markets reflects the uncertainty about the path ahead. What will be more important to the Fed: unemployment or inflation?” Matus said. “If unemployment rises, will the Fed worry about inflation as much as it does now? Or vice versa? And I don't think we know that, even with all the information the Fed has given us. I think everyone knows and I think that's why you see the market behaving the way it is.”