April jobs growth should be strong but pace could soon slow
In April, another 400,000 jobs were added to the economy. It is an indication of tight labor markets. But economists warn that this could cause a slowdown in new hiring.
In light of the fears that inflation has risen too fast in the labor force, a slowdown could be welcomed. Recent government dataThe labor shortage is worsening with a gap of 5.6 million workers and job openings in March.
The labor market is still soaring. At this moment, we need to see a slowdown because full employment is coming and inflation is likely to be a larger problem.” said Mark Zandi (chief economist at Moody’s Analytics). We need to reach a level of 100,000 per month.
Dow Jones expects the unemployment rate to drop to 3.5% in April. This is down from 3.6% for March. At 8:30 AM, the April employment report will be released. ET Friday.
Dow Jones economists polled expect that employers will add 400,000 jobs to nonfarm payrolls in April, a slight decrease from the 431,000 reported March. It would mark the eleventh consecutive month with job creation of 400,000 or more if payrolls reached forecast levels.
The pace at which wages are projected to increase is 0.4% or 5.5% year-over-year, roughly the same rate as the previous month.
Wage is likely to be most relevant in an unstable financial market that is focused on inflation.
After Thursday’s events, markets were shaken the Bureau of Labor Statistics reportedAs productivity fell, unit labor costs rose 11.6% during the first quarter. The increase was due to a 3.2% hourly increase and a 7.2% productivity drop. This is the highest four quarter increase in unit labor cost since 1982. It was the greatest productivity loss in over 75 years.
Peter Boockvar chief investment officer, Bleakley Global Advisors, stated that they don’t want to experience an upward surprise in wages. This is especially true when you consider the fact that labor costs are at their highest level for 40 years. I believe there is a feeling that, even though the economy may be improving, it will not improve. [April’s]This number is very good. Growth is slowing and we know jobs data is a weak indicator…If it is lower, then we can say that there are not enough workers. The wage number is what people focus on the most. It also goes into the whole wage spiral discussion.
Zandi stated that he doesn’t believe inflation is yet driven by wages, but that if the labor force does not improve it could. “Inflation stands at 8%. Inflation is at 8%. Wage growth has been at 5%. “You don’t want that to continue for long,” he stated. As we move into the next year, inflation will begin to creep in. Wage growth will drop below inflation. It’s safe to say that inflation is driving wages. Inflation isn’t driven by wages, at least not right now.
Zandi said that if that happens, then you will get the “dreaded wages price spiral”. The Federal Reserve will then need to be more aggressive in raising rates.
He stated that “Recession risk becomes even greater” after this time. You don’t want an economy that crashes and burns. A steady, as she goes, fully-functioning economy is what you want. This is what the Fed strives for.
Grant Thornton’s chief economist, Diane Swonk, stated that productivity is being affected by the constant churn on the job market.
Swonk stated that he would prefer a balanced environment where inflation is outpacing wages because more productive workers have higher earnings. However, this is not the current situation. Swonk said, “Wherever we are today is eroding our living standards. That’s what’s important.”
Swonk claimed that there were 1.9 open jobs for every worker now, up from the previous 1.2.
Swonk said, “That is why the Fed put the labor markets in their crosshairs. But it’s hard for us to see how to get from 1.9% to 2.2% job openings per employee.” It’s difficult to envision that without increasing the supply and pushing down demand.
Jerome Powell, Fed Chairman, commented many times about tightening in the labor markets at Wednesday’s briefing. He made these comments following the Fed’s half-point increase in interest rates.
Jim Caron of Morgan Stanley Investment Management, Head of Macro Strategies for Global Fixed Income, stated, “If wages are strong and jobs are plentiful in the first three quarters, but growth slows down, that will mean higher unit labor costs.” This shows that there is wage inflation. That is exactly what Powell meant yesterday.
The bond yields have risen after the release of Thursday’s productivity and labor cost data. This is the 10-year yield TreasuryYield was at 3.05% Thursday in afternoon trading, up 9 basis points from Wednesday. A basis point equals 0.01%. The S&P 500 was down 3.6%.