The next US official employment report is due on May 5th, and analysts at TD Securities have pointed out that data suggests a slowdown in payrolls to sub-200,000 levels for the first time since 2020. This comes as high-frequency data indicate that the pace of job creation is likely to take a step down in April, with payrolls set to advance at a sub-200k pace for the first time since 2020. Analysts’ interpretation of the daily Homebase series, which tracks small-business payrolls, suggests employment rose 150k.
This would be in sync with this week’s Beige Book report which noted that employment growth moderated somewhat this period as several Districts reported a slower pace of growth than in recent Beige Book reports. The Beige Book is a report published by the Federal Reserve Board eight times a year, offering anecdotal information collected from bank and branch directors about the state of the economy.
Jobless claims were little changed vs mid-March, but continuing claims have been rising. This story might change in the coming months, though layoffs have concentrated on the information sector (tech), with no evidence of large spillovers into other sectors just yet.
While the labor market has shown signs of improvement in recent months, the number of job openings remains far below pre-pandemic levels. The COVID-19 pandemic has caused a significant labor market shock, with the unemployment rate jumping from 3.5% in February 2020 to nearly 15% in April 2020. Since then, job growth has been somewhat uneven across industries, with certain sectors such as leisure and hospitality still struggling to regain lost ground.
One potential factor that may be contributing to the slowdown in job growth is the continued uncertainty surrounding the COVID-19 pandemic, particularly as new variants of the virus emerge and vaccination rates remain uneven across the country. This lingering uncertainty may be causing businesses to take a cautious approach when it comes to hiring decisions. Additionally, disruptions to global supply chains have continued to pose challenges for businesses, which could be weighing on employment growth.
Another possible factor contributing to the slowdown in job creation is the tightening of labor market conditions, as employers may be finding it more difficult to fill open positions due to a lack of qualified candidates. This could be particularly true in sectors such as technology and healthcare, where workers with specialized skills are in high demand.
Furthermore, some analysts have attributed the slower pace of job growth to policy measures such as the extended unemployment benefits, which were recently expanded through September 2021 as part of the American Rescue Plan. Critics argue that these benefits may be discouraging workers from returning to the labor market, as they can sometimes receive more in unemployment benefits than they would from working a low-wage job.
Looking ahead, it remains to be seen how the labor market will be impacted by the ongoing vaccination campaign and the lifting of COVID-19 restrictions. The faster and more efficiently the vaccine is distributed and administered, the sooner businesses can fully reopen and recover, which should lead to an increase in hiring. In the meantime, however, the slowdown in job growth could pose challenges for the economic recovery, particularly if it persists for an extended period.
In conclusion, the upcoming US employment report is expected to show a slowdown in job growth for April, which could be due to factors such as lingering COVID-19 uncertainty, supply chain disruptions, and tight labor market conditions. As vaccination efforts continue and restrictions are lifted, job growth may pick up in the coming months. However, the current slowdown could present challenges to the economic recovery if it lingers for an extended period.
