May jobs reports are expected to show declining employment as the White House warned
US Secretary of Labor Marty Walsh responds that the economy added 428,000 jobs in April, beating estimates from economists.
Job growth in the US was likely to cool in May, suggesting that headwinds from the highest inflation in four decades, global supply chain constraints and a worsening shortage of workers are beginning to weigh on the labor market.
On Friday morning, the Ministry of Labor publishes its closely monitored job report in May, which is estimated to show that wage lists increased by 325,000 last month and unemployment fell to 3.5%, according to a median estimate from Refinitiv economists. It will mark the worst month for job creation since April 2021[ads1], when payrolls grew by 263,000.
“We have had 12 months in a row of wage growth north of 400,000, but that series is coming to an end,” said Greg McBride, financial analyst at Bankrate.
“Job growth will continue, but at a more modest pace in the months ahead as the Federal Reserve works to slow the economy and stop inflation.”
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Signs of a decline in employment are already beginning to appear. A new Federal Reserve report released this week showed that some companies are starting to initiate layoffs, while the ADP National Employment Report showed that private wage growth increased by only 128,000, the lowest amount since the pandemic triggered millions of layoffs in April 2020.
One of the biggest problems for companies is the lack of available labor. Companies are eager to hire new employees and increase wages to attract workers when faced with labor shortages. There were approximately 11.4 million vacancies at the end of April – close to a record high. The number of Americans quitting their jobs is also close to the highest level recorded, according to another government report released on Wednesday.
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In total, there is a gap of approximately 5.46 million between vacancies and the number of available employees, which indicates that the labor market is still extremely tight.
As a result, millions of workers see the biggest wage gains in many years, as companies compete with each other for a limited number of employees. However, many of these gains have been eroded by the hottest inflation in almost four decades which has pushed the price of daily necessities such as petrol, clothing and food significantly higher.
A “now hires” sign outside a Lowe’s store in Dublin, California, May 11, 2022. (David Paul Morris / Bloomberg via Getty Images / Getty Images)
Rising prices have been bad news for President Biden, who has seen his approval rating fall as inflation rises. Earlier this week, in a Wall Street Journal issue, Biden warned of slowing job growth.
“We will probably see fewer record high job creation figures, but this will not be a cause for concern. Rather, if the average monthly job creation shifts next year from current levels of 500,000 to something closer to 150,000, it will be a sign that we are moving with success into the next phase of recovery – since this type of job growth is compatible with low unemployment and a healthy economy. “
Inflation has also forced its way forward Federal Reserve to move more aggressively. Decision-makers at the central bank raised interest rates by 50 basis points in May for the first time in two decades and have signaled that increases of a similar size are on the table at forthcoming meetings.
The Fed’s increasingly hawkish stance is likely to create new burdens for businesses. Higher interest rates tend to create higher interest rates on consumer and corporate loans, which slows down the economy by forcing employers to cut spending. A growing number of Wall Street firms, including Bank of America, Deutsche Bank and Fannie Mae, are now predicting an economic recession over the next two years.
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Former Fed Chairman Ben Bernanke, who led the central bank from 2006 to 2014, has warned that although he believes politicians will succeed in taming inflation, he expects unemployment to rise as a result.
Nevertheless, Bernanke, who spoke last week during a discussion at the Brookings Institution, said he did not expect a return to a 1970s-style recession, as unemployment rose to 10%.
“I am sure, apart from an incredibly new shock, that we are nowhere near a Volcker 1981-1982-like situation,” he said, referring to former central bank governor Paul Volcker, who ran the economy through the ultra-high age. . the inflationary period of the 1970s.
