By Lucia Mutikani
WASHINGTON (Reuters) – U.S. job growth likely slowed to a still solid pace in April, with wages maintaining their steady rise, which would allay fears that the economy was stagnating after activity slowed considerably in the first quarter .
The closely watched Labor Department employment report on Friday is also expected to show that the unemployment rate remains below 4% for the 27th consecutive month. The resilience of the job market, however, does not leave the Federal Reserve in a rush to start cutting interest rates, which could significantly slow the economy.
The US central bank on Wednesday left its benchmark overnight interest rate unchanged at the current range of 5.25%-5.50%, where it has been since July.
“The blossoming of a strong but still beautiful job market,” said Sung Won Sohn, a professor of finance and economics at Loyola Marymount University. “A slow but healthy labor market will continue through 2025. The only time I see a dramatic decline is if the Fed keeps rates high for too long.”
Nonfarm payrolls likely increased by 243,000 jobs last month after rising 303,000 in March, according to a Reuters poll of economists. Job gains would be slightly below the monthly average of 276,000 in the first quarter.
Estimates ranged from 150,000 to 280,000. The labor market has so far defied predictions of a sharp slowdown signaled by surveys including the Institute for Supply Management and the NFIB. The ISM services employment measure has been quite weak since last October.
The NFIB’s small business hiring indicator fell to near a four-year low in March before rebounding in April.
Most economists, however, cautioned against reading too much into the surveys, arguing that they have long failed to offer reliable signals about nonfarm payrolls. They were also unperturbed by a near-stagnation in worker productivity in the first quarter, noting that the trend remained solid.
“I don’t see any real signs of distress,” said Dan North, senior economist at Allianz Trade.
UNEMPLOYMENT RATE IS STABLE
Economists also dismissed the continued decline in temporary help staff, typically seen as a harbinger of future hiring. Temporary aid has fallen in 23 of the last 24 months. They noted that companies continued to accumulate workers.
Job gains were driven by health care, state and local governments, the construction sectors, as well as the leisure and hospitality industry, which are trying to increase staffing levels after losing workers during the COVID pandemic. -19.
This pattern is expected to continue in April.
Average hourly earnings are forecast to increase 0.3%, matching March’s gain. There is, however, an upside risk, as about half a million California fast food chain workers began receiving a $20 per hour minimum wage in April.
“We would typically look for another 0.3% increase, which was the monthly average in both the fourth quarter of 2023 and the first quarter of 2024,” said Lou Crandall, chief economist at Wrightson ICAP. “However, we expect the minimum wage increase for fast-food workers in California to translate into a nearly 1% increase in hourly earnings in the leisure and hospitality industry in April, which would add nearly a tenth of a cent to the national average.”
Wages are forecast to rise 4.0% in the 12 months to April, after rising 4.1% in March. Wage growth in the 3% to 3.5% range is seen as consistent with the Fed’s 2% inflation target.
Financial markets continue to expect the central bank to begin its easing cycle in September. A minority of economists believe the window is closing. Since March 2022, the US central bank has increased its policy rate by 525 basis points.
The unemployment rate was forecast unchanged at 3.8% in April. The labor market has benefited from an increase in immigration over the past year, which economists estimate will have increased the labor supply by about 80,000 per month in 2023.
“While we believe the continued flow of new immigrants into the labor market boosted payrolls and domestic employment in the April report, we do not anticipate an impact on the unemployment rate due to the offsetting boost in labor supply,” Spencer said Hill, economist at Goldman Sachs.
(Reporting by Lucia Mutikani; editing by Andrea Ricci)
