Modest job gains are expected for the month of April as growth slows from what seemed to be a rapid spurt early in the first quarter.
The U.S. Bureau of Labor Statistics will release the monthly jobs report tomorrow morning. Disappointing figures in March, after three previous months of significant gains, have had a sobering effect, though no one anticipates things getting worse.
“There’s no policy or external change right now that’s hitting our economy that’s going to take it one direction or another,” said John Silvia, chief economist for Wells Fargo.
The overall expectation for non-farm payroll gains is a little over 160,000 jobs, which would be continued positive, but slow, growth. This is a particularly sharp drop compared to the 200,000 jobs gained in the three months preceding March. The private sector only picked up 120,000 jobs at the end of the first quarter.
But with two percent growth in the U.S. gross domestic product and positive increases in other areas like consumer spending and small business owner optimism, there’s a sense of certainty that that things won’t grind to a halt despite continued global economic upheaval.
“Europe has a small negative impact in terms of our trade. The Chinese slowed down but two to 2.5 percent seems to be what we’re doing and I think we’re just moving along,” Silvia said.
The unseasonably warm winter coupled with what some economists are calling the “seasonal adjustment problem” are just two factors that may have contributed to the huge gains earlier in the year.
Consumers flocked to car lots during that time when the cold would have kept them at home otherwise. Construction, which normally tapers off in winter, picked up giving manufacturing a boost.
And there is also debate about whether the seasonally adjusted monthly unemployment rates, currently at 8.2 percent, are accurate. Some question the government model used to generate the rate saying that it may be skewed as a result of the below average employment rates at the height of the recession.
Whatever the factors contributing to the sharp increase in jobs early in the year, cautious optimism reigns. The Federal Reserve Board of Governors issued a statement highlighting factors that contribute to the continued growth, but also pointed out weak spots.
“Labor market conditions have improved in recent months; the unemployment rate has declined but remains elevated. Household spending and business fixed investment have continued to advance,”the board said in its statement.
And still others remain unconvinced that the economy has stabilized. Stephanie Luce, an associate professor of labor studies at the City University of New York Murphy Institute, doesn’t expect even modest gains.
“Despite some indicators of a recovering economy, the impact for jobs and wages continues to lag far behind what is needed to have full recovery from the last few years,” Luce said.
She said that the growth in low-wage sectors like retail have curtailed consumer demand, hurting overall economic expansion. Low-wages may be also impacting labor force participation rates.
“As wages remain low, with a federal minimum wage of $7.25 an hour, for many people, the cost of work equals or exceeds potential income from a job, particularly if they have children and would need child care,” Luce said. “This makes it very difficult to take a job if you have child care, elder care, or other responsibilities that would make it costly to work.”
But Silvia of Wells Fargo said he thinks the decline in labor force participation rates has bottomed out.
“Consumer confidence on the job front has improved and months of good job news suggests folks will now start looking for jobs and not shy away,” Silvia said.
The number of of discouraged workers shrank by 14 percent from February to March, which may have also contributed to the modest drop in the unemployment rate as more people resumed looking for jobs.