A job seeker takes a flyer at a career fair at Brunswick Community College in Bolivia, North Carolina, on April 11, 2024.
Alison Joyce | Bloomberg | Getty Images
Hiring is likely to continue at a rapid pace in April as investors look for any cracks in the labor market that could impact the Federal Reserve.
Nonfarm payrolls are expected to show an increase of 240,000 for the month, according to the Dow Jones Consensus which also sees the unemployment rate holding steady at 3.8%.
If this total number is accurate, it would actually reflect a small step back from the average 276,000 jobs per month created so far in 2024. Additionally, this growth could increase the Fed's reluctance to cut interest rates, With the slowdown in the labor market. Inflation remains above the central bank's target of 2%.
“There are definitely still tailwinds,” said Amy Glaser, senior vice president of business operations at job site Adecco. “For April, the name of the game is steady Eddie while still being flexible, and then we look to some of the seasonal trends we expect going into the summer.”
Glaser added that the April jobs market was characterized by more strength in health care, leisure and hospitality. These two sectors were key sectors for employment growth this year, with healthcare adding about 240,000 jobs so far, and leisure and hospitality contributing 89,000 jobs.
However, she said growth in the coming months could spread to areas such as education, manufacturing and warehousing, part of typical seasonal trends as teachers look for alternative jobs in the summer and students go out looking for jobs.
“I don't expect to see big surprises this month based on what I'm seeing on the ground,” Glaser said. “But we've been surprised before.”
Overcome expectations
Indeed, the labor market has been full of surprises this year, beating Wall Street estimates at a time when many economists expected employment rates to slow. The increase of 303,000 in March shattered expectations and was part of a glut of data showing the job economy remains strong, wages continue to rise and inflation has not moved much after falling sharply in 2023.
That has pushed the Fed into a bind as officials are reluctant to start cutting interest rates until they get more convincing evidence that inflation is under control.
Policymakers will be watching several parts of tomorrow's report for evidence that job growth is not helping to boost price pressures.
If payroll growth misses expectations slightly and wage pressures ease as more people enter the workforce, that would be an ideal scenario for the Fed, said Drew Matos, chief market strategist at MetLife Investment Management.
“The moderate scenario is a high unemployment rate with a high participation rate,” Matos said. “What that suggests is that there is a bit of weakness which should translate into less pressure on wages and takes some concerns about persistently high levels of inflation off the table.”
Investors are informed
Markets will also be watching wage numbers closely.
Consensus estimates put hourly earnings growth at an average of 0.3% month-over-month, close to the March move, and the 4% year-over-year increase, or just below the 4.1% the previous month. However, Matos said the wage numbers could be distorted by immigration patterns as well as California's minimum wage increasing this year to $16 an hour.
Federal Reserve Chairman Jerome Powell said Wednesday that wage pressures have eased over the past year as the labor market shifts to a better balance between supply and demand.
“Inflation has declined significantly over the past year, while the labor market has remained strong, and this is very good news,” he said in his press conference after the last meeting of the central bank. “But inflation is still very high.”
Markets were in a state of volatility with increasing uncertainty over the Federal Reserve's interest rate path, although Wall Street was in rally mode on Thursday, the day before the Bureau of Labor Statistics report was released at 8:30 a.m. ET.
“What you're seeing in the markets reflects uncertainty about the path forward. What will be more important to the Fed, unemployment or inflation?” Matos said. “If unemployment started to rise, would the Fed care about inflation as much as it does today? Or vice versa? And I don't think that even with all the information the Fed has given us, we know that. I don't know. I think anyone knows and I think that is The reason you see the market behaving this way.”
