The pace of US job growth is likely to have slowed further in April, in the first major test of the country’s economic health since the Federal Reserve signaled it was about to end its cycle of interest rate hikes.
According to economists polled by Bloomberg, 183,000 nonfarm jobs were reported to have been lost in the US last month, compared with 236,000 in March. If true, that would be the smallest monthly increase since late 2020.
The jobless rate is said to have risen to 3.6 percent from 3.5 percent, although month-on-month hourly wage growth is expected to remain solid at 0.3 percent. Year-on-year, wages are estimated to have increased by 4.2 percent.
The data will be released Friday at 8:30 a.m. Eastern Time by the Bureau of Labor Statistics.
Wages are a key driver of inflation, particularly in the service sector, so economists and investors will be watching the numbers closely for signs that higher interest rates are slowing the economy and lowering inflation.
The US Federal Reserve announced its tenth straight interest rate hike on Wednesday, raising interest rates to a range of 5 to 5.25 percent. Fed Chairman Jay Powell said the labor market remains “extraordinarily tight” but said: “There are some signs that supply and demand are . . . come back into better balance.”
Data released earlier this week supported Powell’s view, showing a stronger-than-expected fall in job vacancies to their lowest level since April 2021. Still, separate figures released last week showed wage growth remained relatively strong and inflationary pressures in several areas high.
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Powell stressed on Wednesday that it would still take some time to bring inflation towards the Fed’s 2 percent target, but investors have bet the central bank will move quickly to rate cuts, with the first as early as July will take place.
Jack Janasiewicz, portfolio manager at Natixis Investment Managers, said stronger-than-expected jobs or wage growth data this week would “rekindle the idea that the Fed isn’t done yet.”
He also stressed the importance of labor force participation data, which counts the number of Americans who are employed or actively looking for a job. The rate has risen in recent months after falling dramatically at the start of the coronavirus pandemic.
“There is reason to believe that people will come back from the sidelines and increase the labor supply that the Fed is looking for,” Janasiewicz said. “One of the better ways to a soft landing is to increase the labor supply rather than see people laid off.”
Asked Wednesday about the tension between the Fed’s dual mandate to lower inflation while maximizing employment, Powell said, “Right now, we need to focus on bringing inflation down. Luckily we have been able to do this so far without unemployment rising.”
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