STOCK EXCHANGE OVERVIEW 05/07/2022

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NASDAQ-Adv: 1,165 Dec: 3,541 NYSE-Adv: 1,225 Dec: 3,048 (Source: Nasdaq)

The unemployment rate in the United States likely fell to its pre-pandemic low of 3.5% in April, while job growth slowed to a still strong pace amid widespread shortages of workers, highlighting the challenge the Federal Reserve faces in reining in high inflation.

Friday’s closely watched Labor Department jobs report is also expected to show wages rose solidly last month and highlight the economy’s solid fundamentals despite a decline in gross domestic product in the first quarter.

“Consumers have money to spend and companies are trying to hire, but labor shortages are getting worse,” said Sung Won Sohn, professor of finance and economics at Loyola University. Marymount of Los Angeles. “I think we are seeing the start of a wage price spiral, and that will be a difficult problem to solve, even for the central bank.”

Nonfarm payrolls likely rose by 391,000 jobs last month after rising by 431,000 in March, according to a Reuters survey of economists. This would mark a slowdown from the average gain of 562,000 jobs per month in the first quarter and end an 11-month streak of payroll gains above 400,000. Estimates ranged from as little as 188,000 jobs added to 517,000.

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

There were a record 11.5 million job openings on the last day of March, which widened the gap between jobs and workers to a record 3.4% of the labor force, compared to 3.1% in February.

The Federal Reserve on Wednesday raised its benchmark rate by half a percentage point, the biggest hike in 22 years, and said the U.S. central bank would start cutting its bond holdings next month. It began raising rates in March. Fed Chairman Jerome Powell told reporters that “the labor market is extremely tight and inflation is way too high.”

There are fears that the Fed could raise rates too high and stifle economic growth. Although GDP contracted in the first quarter under the weight of a record trade deficit, domestic demand was strong, with consumer spending rebounding and business investment in equipment accelerating.

Part of the projected slowdown in payrolls last month would also reflect a seasonal quirk. April is one of the strongest months for job growth, which is normally anticipated by the seasonal adjustment factor, the model used by the government to remove seasonal fluctuations from data.

Unseasonally adjusted payrolls generally topped 1 million in April, with the exception of 2020 when the COVID-19 pandemic was raging.

“The seasonally adjusted factor anticipates strong hiring in April and has, on average, reduced seasonally adjusted employment by 820,000,” said Ryan Sweet, senior economist at Moody’s Analytics in West Chester, Pennsylvania. “Therefore, we assume another 800,000 drag of the seasonal adjustment factor in April.”

Growing labor shortages were evident this week in other labor market reports, all of which pointed to slowing job gains in April. With the gap between labor demand and supply widening, wages have likely maintained their high rate of growth.

Average hourly earnings should rise 0.4%, matching March’s gain. That would reduce year-on-year wage growth to a still-robust 5.5% from March’s 5.6%. But wage growth could surprise on the upside, as the survey period for the April jobs report included the 15th day of the month.

Compensation for U.S. workers posted its largest increase in more than three decades in the first quarter, helping to support domestic demand.

“After a very large increase in employment costs in the first quarter, evidence of continued upward pressure on wages in the second quarter would keep risks pointing towards a more hawkish Fed,” said Veronica Clark, economist at Citigroup. At New York.

Although Powell said on Wednesday that a 75 basis point rate hike was not on the table, some economists believe the Fed could raise its benchmark interest rate above its estimated neutral rate of between 2 % and 3%.

Other details from the April jobs report were likely strong. The average workweek is expected to have increased to 34.7 hours from 34.6 hours in March. The steady return of workers to the job market also continued last month. A total of 722,000 people entered the labor market in February and March.

As annual inflation rises at its fastest pace in more than 40 years, the rising cost of living is attracting some people who had retired to the labor market.
Source: Reuters (report by Lucia Mutikani edited by Paul Simao)

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