Payroll employment slows in April
Low-wage jobs dominated gains and pulled down the average, not the actual pace, of wages.
Payroll employment is expected to rise 175,000 in April after rising 236,000 in March. Private sector payrolls are expected to increase by 145,000, down from 189,000 in March. Public sector payrolls are expected to increase by 30,000 in April after adding 47,000 jobs in March. Employment gains have shifted in recent months from the goods sector to the service sector. The strongest gains have been in fields hit hardest by the pandemic.
That catch-up has been greatest in the public sector, which is finally able to compete more directly with private sector compensation with new contracts and budgets. Public education is seeing some of the largest gains but still 220,900 jobs below its February 2020 peak.
Private sector gains are similar. They are concentrated in leisure and hospitality, health care (nursing and long-term care facilities) and childcare.
Professional and business services, which were the largest driver of gains above and beyond the peak of February 2020 are moderating. The hiring of accountants remains robust, while layoffs in the deal market are hitting many legal and large consulting firms. Hiring in financial services is waning.
Construction is expected to hold up better than manufacturing activity, although the seasonal adjustment of the data is an uphill battle. Infrastructure spending is ramping up, while the backlog in multifamily construction and commercial real estate is still substantial.
Average hourly earnings are expected to rise by 0.3% in April, the same as March. That translates to an increase of 4.2% from a year ago. That marks a moderation from the 5.3% growth we saw in 2022, but the employment cost index (ECI) for the first quarter suggests that the slowdown in wage gains we have seen this year was more due to composition shifts in employment gains instead of a slowdown in actual wage growth. Low-wage jobs dominated gains and pulled down the average, not the actual pace, of wages.
We have seen the ranks of those with two full-time jobs hit all-time highs.
Separately, the unemployment rate, which is derived from the household survey, is expected to edge up to 3.6%. The participation rate is expected to hold close to the 62.6% cyclical peak of March. That is still below the 63.3% pace we saw in February 2020 and about where one would expect, given the surge in retirements. A rebound in immigration has boosted the prime-age (25-55 years old) participation rate dramatically in recent months; foreign-born workers participate at a much higher rate than native-born workers.
Multiple job holders are expected to continue to increase. The largest rise has been among those with a full-time job. Middle-income households, which saw their wages lag inflation the most, were more likely to pick up an extra job to make ends meet in the face of persistent inflation.
We have seen the ranks of those with two full-time jobs hit all-time highs. The last time that happened was in 2000, the second tightest labor market compared to what we have seen over the last year. Multiple full-time job holders are running about 20% above the 2000 peak on a 12-month moving average basis; no doubt that working from home has made it easier for some to work two full-time jobs but that is still a lot of work.
The ranks of those out and not working due to vacation are expected to remain at a monthly record in April. Spring break for most was in March. However, a late Easter pushed a lot of leisure travel into April.
The ranks of those out ill and unable to work have fallen but remain well above the levels of the 2010s. Viral infections are on the rise, while COVID remains the largest cause of death, despite a drop in daily fatalities.
Risks. Initial unemployment claims have been trending up since September and moved above the 2019 average in recent weeks. Many of the new applicants are higher wage workers, which is unusual, and reflects earlier layoffs. Most states do not allow workers to apply for unemployment until their severance lapses. Those same workers are counted as employed until their paychecks stop. An end to severance checks could mean fewer people show up on payrolls in April.
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