The closely monitored monthly employment report from the Bureau of Labor Statistics is due to be released on Friday morning. The consensus among economists surveyed by Refinitiv is that 350,000 jobs were added last month, with an unemployment rate of 3.5%. It would be a new low in the pandemic era. The labor market has almost recovered to its pre-pandemic strength, with only 1.2 million jobs in the United States before closures began and unemployment slightly above pre-pandemic levels. 3.5% in April. With more employment growth forecast for May, this is expected to improve even further.
Now, attention has shifted from the “Grand Reopening” to whether the Federal Reserve’s attempt at a “soft landing” by raising interest rates to control inflation will inadvertently plunge the economy into recession.
In the first quarter of 2022, the US economy contracted, measured by gross domestic product, the broadest data on economic activity. The common definition of recession requires two consecutive quarters of declining GDP, which seems an awkward possibility for the United States.
But some economists are quick to point out that a common feature of recession is missing from the combination: the labor market remains strong.
“Consumers are the key, in our view, especially in hiring trends. More people in employment, who provide additional income, offer support for continued spending,” said Mike Skordeles, a senior macro-strategist at United States to Truist Advisory Services.
Consumer spending is the backbone of US economic growth. And while inflation has skyrocketed, the tight labor market has helped keep people spending for the time being.
Skordeles said he is keeping a close eye on initial weekly unemployment claims, as any weakness in those data will appear first. But so far no one was able to send in the perfect solution, which is not strange.
“If we see a substantial sustained increase in weekly unemployment demands, we will change our position in recession,” he said.
Initial weekly unemployment claims for the week ending May 28 were down 11,000 from the previous week, with 200,000 first-time unemployment benefits.
Private payroll provider ADP reported on Thursday that employment rose just 128,000 in May, well below Refinitiv’s estimate of 299,000. In addition, April data revised up to 202,000 job gains from the 247,000 previously reported.
Expectations for the May job report
If the government report on Friday shows that 350,000 jobs were added to the economy in May, that would be a slowdown from March and April, when 428,000 jobs are added each month, and would make it the slowest job growth since April 2021.
An unemployment rate falling to 3.5% would coincide with the all-time low before the arrival of Covid. The last time unemployment was so low before 2019 was in 1969. The same unemployment rate was expected in April, but it did not come to fruition. The unemployment rate in April was 3.6%. In any case, the slowdown in employment growth is expected and at the moment there is nothing to worry about: economists predict a slowdown in employment growth this year as the recovery in the labor market enters a new phase. In April, there were nearly two positions available for each unemployed person, according to the Job Offer and Job Rotation Survey published on Wednesday. And while companies offer higher wages to attract staff, competing for talent in such a tight labor market has taken its toll: a record number of Americans left their positions in March, and many chose to move on to better ones. opportunities. “Many employers are still there. They are zealously trying to increase their payroll, and workers still seem to be hesitant to commit,” ADP chief economist Nela Richardson said in a blog post. “Despite the shortage of labor, workers are not ahead, thanks to inflation. Real wages, or inflation-adjusted wages, fell 2.6% in April, similar to the decline of March, another plateau “. facing the grocery store and the gas pump as the main drivers of consumer behavior, the economy could look very different by the end of the year. For the time being, the Fed predicts that the US labor market will remain tight and will continue to support consumer spending. The desire to hire also continues to provide support.
“We are not yet seeing a turnaround in the job market, although employees are more concerned about a possible slowdown and layoffs,” said Daniel Zhao, senior economist at Glassdoor.