If Friday's employment report confirms the forecasts of economists and confirms current trends, it could bring back a feeling similar to that before the pandemic.
According to Refinitiv's consensus estimate, economists expect that the US economy added 180,000 new jobs in April. This would be the lowest monthly gain since December 2019 if you exclude the losses from the first year.
This could also be a way to emphasize that the US labour market has cooled from the frenzied recovery of the last two years.
The latest report on labor turnover from the Bureau of Labor Statistics, Job Openings and Labor Turnover Survey for March, showed that the number of job openings decreased, hiring remained flat, and quits were trending down. Layoffs also increased.
Nick Bunker is the director of economic research at Indeed Hiring Lab. This is the arm that provides economic data insights and analyses for job site Indeed.
It is logical and desirable that the Federal Reserve, in its effort to combat inflation, has a flurry of interest rate increases. Bunker says it is unclear just how significant a slowdown may be.
He warned that a cooling down can quickly turn into a downward spiral.
What rising unemployment rates mean
According to Refinitiv, economists expect the unemployment rate to increase to 3.6%. Nevertheless, the unemployment rate would remain at historically low levels.
Bunker plans to examine the unemployment rate and the reasons behind it to determine if a downswing has turned into a recession.
Bunker stated that it is concerning if more people lose their jobs [than leave voluntarily].
In March, the labor force participation rate reached 62.6%. This is a record high for a pandemic era. This figure is still below the February 2020 rate (63.3%).
Even so, the number of layoffs continues to rise.
According to a report published Thursday by the outplacement firm Challenger, Gray & Christmas, US employers cut 66,995 jobs in April, bringing their total for January-April to 337,411, based on a report. The report states that outside of 2020, this is the highest total year-to date since 2009.
Retailers were the biggest losers, with 14,689 jobs cut.
In a recent statement, Andrew Challenger, senior Vice President of Challenger, Gray & Christmas, said that retailers and consumer goods producers are preparing themselves for a reduction in consumer spending, especially with the Fed raising interest rates to try to control inflation.
In recent weeks, weekly jobless claims are on the rise. Initial filings rose 13,000 to 242,000 in last week. They remain below averages from the past: in the decade prior to the pandemic weekly claims averaged 311,000.
According to Commerce Department data published last week, inflation-adjusted spending by consumers was flat in march, marking the fourth consecutive month that consumer expenditures were either unchanged or decreased.
Tim Quinlan, an economist at Wells Fargo, told CNN that consumers are "retrenching". Gregory Daco, EY economist, noted that it is not yet clear how much more consumer spending will drop due to the persistently high price levels and rising interest rates as well as tighter lending terms resulting from the broader banking crisis.
ADP's look at the private sector's employment, released just two days before BLS's employment report, can be viewed as a prelude to what the federal data will reveal.
The April ADP report may surprise both the markets and economists. According to the ADP National Employment Report released on Wednesday, private-sector companies added 296,000 new jobs in April. This was more than double the 142,000 that had been predicted by economists.
ADP's reports don't always match the official federal report. BLS' private sector payroll gains in January were three times higher than ADP.
Michael Feroli said that the ADP number today argues against downside risk.
Separate private sector indicator that will be updated this Friday shows that "the smallest small businesses," those with one to nine employees continue to lose workers.
In March, despite the fact that overall hiring resulted in an increase in payrolls across the country, small businesses employing nine or less employees experienced a loss of 39.600 jobs. This is according to Intuit QuickBooks Small Business Index. The index was produced by Intuit QuickBooks in collaboration with an academic team headed by Ufuk Acigit, a professor of economics at the University of Chicago.
Akcigit, a CNN correspondent, said that 'our index shows the small business employment is back at pre-pandemic levels'. If it continues in this manner, we'll be in an even worse position than pre-pandemic. This is alarming.
Fed Chair Jerome Powell is still in favor of a soft landing, and the US labour market's resilience continues to be a major reason for this.
Powell, at the end of the two-day meeting on monetary policy, said: 'We have raised rates by five percentage points in just 14 months. The unemployment rate is now 3.5%. It's pretty much the same or even lower than when we began.'
He said that job openings are still high - JOLTS revealed there were 1.6 jobs available for every job seeker - and that there is evidence of a gradual cooling on the labor market.
Powell stated that it was not possible to have job openings decline so much without the unemployment rate increasing.
He said: 'It is possible to continue to cool the labor market, without the large increases in unemployment which have been associated with previous episodes.' "And that would go against the history." I understand that this would be contrary to the historical pattern.
"I think that the likelihood of not having a depression is higher than that of experiencing one." He said. I do not rule out the possibility of a recession. I just hope it will be mild.