The Labor Department on Friday will release its April employment report, which is expected to show a continued slowdown in hiring as pandemic-era growth sectors revert to normal levels of activity and interest rate increases take the air out of business expansions.
Forecasters estimate that the economy added 180,000 jobs last month, which would be a marked step down from the monthly average of 345,000 jobs in the first quarter of 2023 — but not yet the contraction that many predict for later in the fall.
“We expect a more negative and profound effect of interest rates on the labor market in the second half of the year,” said Frank Steemers, a senior economist at the Conference Board. “At the start of the year, employment growth was much stronger than I expected.”
Job creation has repeatedly exceeded projections over the past year, even in the face of the Federal Reserve’s efforts to tamp down prices by making borrowing more expensive. But job postings have been receding quickly, and the rate at which workers quit their jobs is almost back down to where it stood in 2019. At the same time, more Americans have been returning to the work force, and immigration has rebounded, making it slightly easier for employers to hire.
In March, industries sensitive to interest-rate changes — like construction and manufacturing — started to shed jobs as they worked through orders that had piled up during the pandemic. The outplacement firm Challenger, Gray & Christmas reported Thursday that employers had announced job cuts totaling about 337,000 positions this year, concentrated in retail and the technology industry.
If a wider economic downturn sets in, job reductions will probably look different than they have in previous recessions.
Mr. Steemers recently constructed an index estimating the risk of job losses across various industries. Demand for labor has been so acute in fields like leisure and hospitality — where staffing hasn’t yet returned to its prepandemic level — that even a pullback in consumer spending wouldn’t result in many layoffs.
But industries like the information sector, which hired rapidly in 2021 and 2022 to serve a population that became more reliant on tech during the pandemic lockdowns and shift to remote work, could make even deeper cuts.