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What to Look For in the Latest Jobs Report U.S. Job Growth Slower in April, With Rise of 160,000
(about 3 hours later)
At 8:30 a.m. Eastern time, the Labor Department will report the latest figures on hiring and unemployment in April. After months of gravity-defying gains, the American jobs machine cooled slightly in April, as employers took their cue from other signs that economic growth was slowing by easing up on new hiring.
Employers have added an average of nearly 250,000 jobs a month since last fall, but the labor market’s rapid gains are believed to have cooled somewhat in April. Wall Street is looking for a gain of about 200,000 in payrolls. The 160,000 increase in payrolls in April reported by the Labor Department on Friday comes after the best two-year stretch for the job market since the tech-fueled boom of the late 1990s.
Unemployment is expected to have edged down by one-tenth of a percentage point, to 4.9 percent. The unemployment rate rose slightly in March as workers returned to the labor force, but steady gains in hiring are expected to push the jobless rate back below the psychological threshold of 5 percent. The unemployment rate stayed at 5 percent.
This is what you should watch for: The consistent strength in hiring contrasts with other economic signals that have been decidedly mixed recently. Late last month, for example, the government reported that the economy barely expanded in the first quarter.
Despite other signs of economic stumbles — most notably an anemic 0.5 percent increase in the rate of overall economic growth in the first quarter of 2016 — employers have continued to hire briskly. But most experts say the steady gains in the labor market in recent months are a sign that the economy should continue to expand at a decent, if hardly spectacular, pace for the rest of 2016.
The estimate calls for a slightly smaller monthly increase in job creation for April, but even that represents much faster hiring than indicators like the tiny change in gross domestic product would imply. At some point, these indicators have to correlate — either hiring will slow down, or economic growth will speed up. A hopeful sign of the economy’s trajectory in Friday’s report was the 0.3 percentage point rise in average hourly earnings.
For much of the recovery, the big complaint was that average hourly earnings weren’t rising along with hiring. In other words, while 95 percent of Americans who want a job might now have one, they weren’t benefiting from the upward pressure on wages that usually accompanies low unemployment. Until a nascent pickup recently, wages had been a sore point throughout the nearly seven-year-old recovery, barely rising despite the big drop in the unemployment rate.
That has begun to change in recent months, albeit slowly, as more workers are seeing gains in pay. Most experts are looking for a 0.3 percent monthly gain in average hourly earnings for April, bringing the year-over-year increase to 2.4 percent. The change in earnings in April suggests that the upward tick in wages wasn’t a fluke. Wall Street had been expecting a 0.3 percentage point gain, which would translate to a 2.4 percent increase over the last year.
Anything stronger than that would suggest the recent pickup in wages isn’t a fluke, but rather the inevitable product of a tightening labor market. Recent increases in the minimum wage in many states and municipal areas are probably also providing salary gains, experts say. In an interview before the release of the data Friday, Diane Swonk, an independent economist, said there were indications that wages were shoring up, even if the month-to-month pattern had been uneven.
Three months ago, Wall Street was bracing for a slowdown, and the possibility of a recession was front-page news. Between early January and mid-February, the stock market fell by more than 10 percent. With dozens of states and cities having either already implemented or considering future increases in the minimum wage, she explained, salaries at the low end of the job market are finally inching up.
Those fears proved to be premature. With an assist from higher oil prices as well, the stock market has since recovered all of its losses and is actually up (very) slightly for the year. “We’ve hit a tipping point,” Ms. Swonk said. “It’s showing up in low-wage jobs, for waiters and waitresses, in retail and in leisure and hospitality.”
The pace of hiring might have slowed in April. But a jobs gain of under 200,000 — or even below 150,000 — doesn’t mean a recession is around the corner, despite what you might hear. In other words, if the hiring figure for April turns out to be disappointing, consider it payback for months of above-trend gains, not an ominous downshift. States including California, Colorado, Michigan and Massachusetts increased their minimum wages at the start of 2016, while Maryland and Washington, D.C., are set to enact raises on July 1.
When roughly 40,000 Verizon workers went on strike last month, it was right in the middle of the week that government number-crunchers analyze to gauge the strength of the job market. Whether a result of legally mandated increases at the bottom or because of raises doled out by employers eager to retain more skilled workers in a healthier economy, better-paying and more plentiful jobs also seem to be luring workers back into the job market.
While most economists on Wall Street don’t expect the strike to alter the payroll numbers, there’s an outside chance it could. If it does, it could reduce payrolls by about 30,000. That’s not a huge number in a work force of 144 million, but it’s enough to move the needle in the monthly report. “The good news is that we are re-engaging people who’ve been on the sidelines,” Ms. Swonk said. “The question is how far we can go.”
That question is also being pondered by Janet L. Yellen, the chairwoman of the Federal Reserve. Though the central bank kept rates steady when policy makers met last month, some economists argue they could move after their June meeting.
However, with inflation still very subdued and more dovish officials worried that another rate increase could choke off growth, other experts argue that any tightening in monetary policy will not happen until later in the year.
Indeed, some notable pockets of weakness remain in the nation’s economy, especially in regions dominated by manufacturing and the energy industry.
Despite contradictory macroeconomic signals, in hot fields like health care, technology and professional services, employers are scrambling to find new employees. In Chicago, ContextMedia brought 25 new employees aboard in April and plans to add about 100 workers a quarter for the rest of 2016, said Iman Jalali, the company’s chief of staff.
ContextMedia provides tablets and digital wallboards for doctor’s offices, supplying the devices, software and content for patients to access information during their visits.
Salaries for software developers with several years’ experience can top $100,000 and it is a similarly competitive market for account managers, sales representatives and marketers. “The market is tighter,” Mr. Jalali said.
“We’re trying to attract talent from across the country,” he added. “We’ve got some of the best people in Chicago but when you are growing so quickly you need to keep growing the pool.”