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HomeU.S.April jobs report likely to point to slowdown in hiring last month

April jobs report likely to point to slowdown in hiring last month

As rising interest rates and a faltering economy began to weigh on employment in April, job growth in the U.S. likely slowed significantly.

According to the median estimate of Refinitiv economists, the U.S. Department of Labour’s April payroll report will show that hiring increased by 180,000 last month and that the unemployment rate inched up to 3.6%.

This would be a decline from the 236,000 increase recorded in March and the lowest monthly payroll growth since December 2020, when the economy lost 268,000 positions.

As policymakers attempt to rein in inflation, the Federal Reserve is closely monitoring the report for signs that the labour market is finally softening after months of robust employment gains. Despite the fact that the Consumer Price Index has decreased from its June high of 9.1%, it is still approximately three times the pre-pandemic average.

Source: U.S. Bureau of Labor Statistics

A lower-than-expected figure on Friday could be a positive omen for the U.S. central bank, which on Wednesday afternoon authorised the 10th consecutive rate increase before leaving the door open for a pause in the tightening cycle.

“After alluding to a pause, all eyes will focus on the labor market,” said Jay Woods, chief global strategist at Freedom Capital Markets. “It has been the one major sticking point in the Fed’s inflationary battle as unemployment remains at historical lows. While it tends to be a lagging inflationary signal, it is important for the Fed to see the labor market cool – now more than ever.”

In the past year, the labour market has remained historically constrained, but there are indications of a decline. According to a separate report released on Wednesday, there were approximately 9.7 million job openings in March, the lowest level in two years.

Nonetheless, job openings remain at historically high levels. Prior to the onset of the COVID-19 pandemic in early 2020, the previous record was 7.6 million. There are still approximately 1.6 positions per American unemployed.

In the past few months, there has been a surge of notable cutbacks, and the list continues to grow daily. Amazon, Apple, Meta, Lyft, Facebook, Google, IBM, Morgan Stanley, and Twitter are among the businesses that are laying off employees.

“The April jobs report should confirm that the labor market slowdown is well underway and that the economy is cooling,” said Lydia Boussour, senior economist at EY.

Jobless claims come in higher than expected ahead go March jobs report

Losses in employment could soon affect the entire labour market. Fed Chairman Jerome Powell has made it plain that policymakers expect job growth to stall and unemployment to rise as the Fed raises interest rates, but he has argued that the alternative of unfettered price inflation is worse.

For many economists, the question of whether unemployment will rise is now, not if.

Previously, the central bank predicted that the unemployment rate would climb markedly to 4.6% and remain elevated in 2024 and 2025 as higher interest rates continue to weigh on the economy by driving up financing costs. This could result in the elimination of over one million jobs.

Increasing interest rates usually results in higher interest rates on consumer and business loans, which retards the economy by compelling employers to reduce expenditure.

News Desk
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