Employment Expected to Remain Strong in April

Payroll employment is expected to rise by 450,000 in April, close to the 431,000 pace we saw in March. Gains are expected to be broad-based but stronger in the service sector than the goods sector. Jobless claims were about the same during the survey weeks in both March and April, which supports the argument for continued improvement in employment.

The private sector is expected to account for 420,000 of those gains, while hiring in the public sector picks up. The IRS pushed particularly hard to hire up and fill staffing positions to speed the processing of tax returns. The problem is public sector compensation growth, which fell even further behind in the first quarter.

Travel and tourism continued to accelerate during the month; a later than usual Easter spread out the normal spring break schedule, while business travel started to come back. That means another month of robust gains in leisure and hospitality, although staffing shortages, notably at resorts and restaurants, remain acute. Many restaurants are limiting the hours that they are open and the tables they will actually seat, given staffing problems; they simply can’t meet demand with the staff they have.

Hiring in professional services is expected to remain robust, as companies are still ramping up demand for everything from ESG audits to help with logistics and cybersecurity. Hiring in finance could suffer a setback, especially in credit intermediation. A collapse in mortgage refinancing and drop in vehicle sales have taken a toll on loan originations. Large cash investors are crowding out first-time buyers.

Gains in retail are expected to remain solid, along with transportation and warehousing. The pivot away from online back to in-person shopping and preferences for services over goods is, however, shifting demand. Amazon announced with its earnings last week that is was done staffing up and buying warehousing facilities. That means that the floor for wage gains could plateau in the months to come.

Manufacturing, construction and mining activity are all expected to continue to post moderate gains. A temporary easing of supply chain problems in the chip sector enabled vehicle producers to ramp back up. Lockdowns in China will affect supply chains with a lag; look for more disruptions to production in the months ahead. Builders are reporting a new round of delays, which is further escalating costs and delaying the completion of projects.

Average hourly earnings are expected to rise by 0.4% in April and increase 5.5% from a year ago. That is in line with recent gains. The employment cost index, which measures both wages and benefits, revealed that wages actually accelerated fairly dramatically in the first quarter, as wage gains move up the pay scales. Wages are picking up across a broader range on earners than earlier in the cycle; job hopping is paying off the most for generation Z.

Separately, the unemployment rate is expected to dip to 3.5% in April, the same as we saw in February 2020. Participation in the labor force has picked up fairly rapidly in 2022. Some of that is in response to rising wages but a good portion is in response to higher inflation. The number of multiple job holders - those with a full and a part-time job - started to pick up as inflation flared last fall; this is increasing the supply of workers but for an unfortunate reason. People are taking on extra work to make ends meet in a world where the costs of the basics of food, energy and shelter are all rapidly escalating. The share of the over-65 crowd that is returning from retirement has also picked up; it is hard to live on a fixed income in a world where costs are soaring.

The ranks of the unemployed - those actively seeking work - are expected to continue to shrink. That will keep the number of job openings per worker elevated, even as demand for workers cools. Our own back-of-the-envelope calculations suggest that job openings per worker moved up to 1.9 in March from 1.8 in February, the last month we had official data on job openings. The drop in job openings was slightly overshadowed by the drop in the ranks of the unemployed.

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