The April jobs report is expected to show the U.S. labor market cooled last month but that hiring remained solid even in the face of high interest rates and chronic inflation.
The Labor Department's April payroll report is projected to show that hiring increased by 243,000 last month and that the unemployment rate held steady at 3.9%, according to a median estimate by LSEG economists.
That would mark a decrease from the 303,000 gain in March, but it remains above the average monthly gain of 231,000 recorded over the past 12 months.
"The April jobs report will likely point to a cooling labor market with some moderation in employment gains, though job creation should remain vigorous," said Lydia Boussour, EY senior economist.
The Federal Reserve is closely watching the report for evidence that the labor market is finally softening after months of surprisingly solid job gains as policymakers gauge when to start cutting interest rates. Officials have suggested that fast wage growth — the product of a strong labor market — was a contributing factor to the inflation crisis that ravaged millions of Americans' pocketbooks over the past few years.
Slower job growth and further moderation in wage gains could be a welcome sign for the Fed, which signaled Wednesday that it remains in wait-and-see mode until officials are certain that inflation is tamed.
"If we did have a path where inflation proves more persistent than expected, and where the labor market remains strong but inflation is moving sideways, and we're not gaining greater confidence, that would be a case in which it could be appropriate to hold off on rate cuts," Fed Chair Jerome Powell told reporters this week.
Average hourly earnings, a key measure of inflation, are expected to increase 0.3% for the month and climb 4% from the same time one year ago. However, Bank of America analysts expect that wage growth could come in faster than expected as the result of California's new law that raised the minimum wage of fast food workers by $4 to $20 an hour.
The labor market has remained historically tight over the past year, defying economists' expectations for a slowdown. Economists say it is beginning to slow after last year's blistering pace, but is still nowhere near breaking