The next jobs report is expected to show slower but still substantial job growth, in the latest sign of cooling due to Federal Reserve interest rate hikes. 

Nonfarm employment is expected to rise by about 234,000, according to the consensus forecast among Wall Street economists surveyed by Bloomberg. That’s substantially lower than the figure for most months over the past year, including the surprisingly strong showings of 504,000 for January and 311,000 in February.  Wages are expected to show slight growth, although less than in previous months. 

Taken together, these forecasts suggest that the post-pandemic boom is beginning to wane. Part of that is due to the Federal Reserve’s efforts to combat inflation by raising interest rates, but it also means that the industries that boomed during the pandemic are now starting to contract and shed their excess labor. 

“The economy is slowing, but only begrudgingly,” explained Michael Gapen, chief U.S. economist at Bank of America. “If we’re going to lean in any direction, it’s still probably to the upside.” 

The slowing is likely to be most pronounced in sectors like technology and construction–sectors that outperformed during the pandemic, and have seen their growth weaken in recent months.  Sectors that suffered during the pandemic, such as restaurants and hotels, are still going strong. 

“I think the story really so far is one of reverting to the means,” said Julia Pollak, chief economist for the online jobs market ZipRecruiter. “The companies that grew 50, 60, 70% in the pandemic are now pulling back.” 

 The unemployment rate is not expected to change significantly from 3.6%. Wage growth is also slowing down, as businesses are no longer under pressure to expand their payrolls. 

“While wage growth is relatively high in normal terms, there’s significant pressure,” Pollak explained. “Employers feel like they’ve tapped out on wage growth and the benefits that it can offer.”

The hiring slowdown is already evident in online jobs markets, where the number of new jobs ads has fallen by about 35%. 

Employers may be becoming more guarded in their hiring decisions because of market uncertainties. “Employers are seeing the news about the risk of a recession being high,” Pollak added. “They’re not rushing to overhire.” 

These recession fears were recently stoked by the collapse of Silicon Valley Bank, which was seized by financial regulators a few days before the employment survey was taken. Another institution, Signature Bank, was seized the same week. 

The bank failures may be too recent to be reflected in the March job figures, but they may materialize in later reports. However, predictions of an economic downturn started long before the current banking worries, with some economists forecasting a mild recession later this year.

Employers are also worried about the Federal Reserve’s efforts to curb price growth through interest rate hikes. The central bank has repeatedly raised its target rate, hoping to prevent rising wages from pushing up prices throughout the economy. Those rate hikes make it more expensive for businesses to expand and hire workers.

If the next employment report continues to exceed expectations, the central bank may feel prompted to raise borrowing rates even higher. “If the economy remains resilient going forward, I think that means the Fed has more to do,” said Jay Bryson, chief economist at Wells Fargo.

“If we don’t see a slowdown, rates are going higher,” Bryson added. “It’s not only going to be 25 basis points, it’s going to be considerably higher than that. “

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