April U.S. employment preview: another solid month of labor market growth

We expect the U.S. labor market to expand by 207,000 jobs in April, on the back of strong expansion in construction, trade, transport and service sector hiring, with the unemployment rate unchanged at 3.8 percent. We also are looking for a pickup in hiring relative to the first three months of the year, which saw an average of 180,000 jobs created on average during the first 91 days. Our forecast implies 0.3 percent month-over-month growth in average hourly earnings, and a 3.3 percent increase on a year-ago basis. The underlying trend will be reflected in three-month average annualized pace of growth, which will likely advance at a more modest 3.1 percent.

Our above-consensus (185,000) forecast is predicated on a noticeable decline in first-time jobless claims below 200,000 during the Bureau of Labor Statistics (BLS) reference week of April 12. Our preferred metric of the pace of firings, the 13-week moving average, stood at 2.16 percent during the reference week for the BLS sample of hiring, in contrast with the top-line estimate of 193,000, both multi-decade lows. At this point in the business cycle it is simply difficult to find willing and able workers across industrial ecosystems. When firms find workers, they are increasingly turning to expensive training programs in an effort to attract and retrain labor. In our estimation, this is causing many companies—especially those reliant on task-oriented and process jobs—to turn to automation.

At this point in the business cycle it is simply difficult to find willing and able workers across industrial ecosystems.

Often in the latter portion of the business cycle, first estimates of labor-market dynamics tend to overstate the strength of the job market. Thus, we will be looking at aggregate hours worked, which is a strong forward-looking indicator of consumer spending, to confirm our estimation of a pickup in the pace of hiring relative to the first three months of the year. In March, hiring increased 1.8 percent and expanded at 1.5 percent on a three-month average annualized pace.