Unemployment in the US is expected to fall to 3.5% in April, but job creation will slow

A popular report from the Ministry of Labor on jobs, which will be released on Friday, is also expected to show that wages rose significantly last month and highlight the strong fundamentals of the economy, despite falling gross domestic product in the first quarter.

“Consumers have money to burn and businesses are trying to hire people, but the labor shortage is getting worse, if there is one,” said Sun Wong Son, a professor of finance at Loyola Marymount University in Los Angeles. “I think we are seeing the beginning of a spiral in wage prices, and it will be a strong nut even for the central bank.”

According to a survey by Reuters economists, wages for non-agricultural enterprises rose by 391,000 jobs last month after rising by 431,000 in March. This will slow the average growth of 562,000 jobs per month in the first quarter and end the 11-month series of wage increases of more than 400,000. It is estimated that the number of additional jobs ranges from 188,000 to 517,000.

Unemployment is expected to fall to 3.5%, the lowest level since February 2020. The unemployment rate was 3.6% in March and fell by four tenths of a percentage point this year.

On the last day of March, a record 11.5 million jobs were created, widening the gap between jobs and workers to a record 3.4% of the workforce, compared with 3.1% in February.

On Wednesday, the Federal Reserve raised its key interest rate by half a percent, the biggest increase in 22 years, and said the US Federal Reserve would start cutting its bonds next month. He began raising rates in March. Fed Chairman Jerome Powell told reporters that “the labor market is extremely tough and inflation is too high.”

Some fear that the Fed will raise rates too much and stifle economic growth. Although GDP contracted in the first quarter due to a record trade deficit, domestic demand was high, consumer spending was rising, and business investment in equipment was accelerating.

SEASONAL CHEMISTRY

The partially expected slowdown in wages last month will also reflect the seasonal whim. April is one of the strongest months for job growth, usually provided by the seasonal adjustment factor, a model the government uses to address seasonal fluctuations.

Off-season adjusted wages totaled more than a million in April, except in 2020, when the COVID-19 pandemic raged.

“The seasonally adjusted ratio predicts a high number of hires in April and reduced seasonally adjusted employment by an average of 820,000,” said Ryan World, senior economist at Moody’s Analytics West Chester, Pennsylvania. “Therefore, we assume that the seasonal adjustment factor will create another 800,000 jobs in April.”

This week’s growing shortage of workers was evident in other labor market reports, all of which pointed to a slowdown in job growth in April. With the widening gap between labor supply and demand, wages are likely to remain high.

The average hourly wage is expected to increase by 0.4%, in line with the increase in March. This will lead to an increase in annual wages to 5.5% compared to 5.6% in March. But wage growth may come as a surprise, as the April job survey period included the 15th of the month.

In the first quarter, American workers’ earnings recorded the largest increase in more than three decades, helping to maintain domestic demand.

“After a very significant increase in employment costs in the first quarter, evidence of continued pressure to increase wages in the second quarter will keep the risks in favor of a more harsh Fed,” said Veronica Clark, economist at Citigroup New York.

Although Mr. Powell said Wednesday that a rate increase of 75 basis points is not being considered, some economists believe that the Fed may raise its base interest rate above the calculated neutral rate by 2-3%.

Other details of the April job report were likely to be important. The average length of the working week is expected to increase to 34.7 hours from 34.6 hours in March. The steady flow of workers returning to the workforce probably continued last month. In February and March, a total of 722,000 people became workers.

As annual inflation rises to its fastest pace in more than 40 years, rising cost of living is forcing some retired people to return to the workforce.

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