The U.S. job market is beginning to resemble what it looked like before the pandemic changed work and life around the world.
With the Labor Department set to release May employment data on Friday, analysts forecast employers added 180,000 jobs last month. That would mean a cooler pace of hiring than in the first three months of the year, but it shows that job growth is still fast enough to keep unemployment under control.
In fact, if the country's unemployment rate remains at 3.9 percent, it would mark the 28th consecutive month with unemployment below 4 percent, the longest stretch since the early 1950s, government data show.
More broadly, experts say the labor market is consistent with an economy approaching a “soft landing,” rather than falling into recession. Redundancies have continued to be reduced and inflationthat broke out earlier this year, has resumed its gradual decline.
Art Hogan, chief market strategist at B. Riley Wealth, said the narrative will hold as long as there are no surprises in Friday's jobs report. A surprise, in this case, would be if May's payroll gains fell below 100,000, which would indicate the economy is hitting a wall, or if it topped 300,000, which would raise concerns about overheating.
Waiting for the Fed
By striving to slow the economy enough to suppress inflation, the Federal Reserve seeks to balance the supply and demand for workers without causing a rise in unemployment or triggering a recession.
“If the rest of the jobs report looks like it did in April, it should help the Fed feel more comfortable about cutting interest rates,” he wrote economist Dean Baker, co-founder of the Center for Economic and Political Research, in a post this week.
That April jobs report had the economy adding 175,000 jobsbelow expectations and a downward shift from the blockbuster hiring in March, when employers added 315,000 jobs.
The April data also included the smallest increase in payrolls in six months, easing concerns that the economy is picking up speed again and would likely prevent the Fed from cutting interest rates this year.
Hogan noted that nonfarm payrolls need an average of about 150,000 a month to keep unemployment under control, given current population growth, and would be in line with pre-pandemic hiring levels.
A number between 150,000 and 200,000 on Friday would be good enough to say the economy is continuing to grow and would likely keep the Fed on track to cut interest rates in September, he added.
As for why so many Americans stay sad about the financial picture of the countryHogan believes human psychology and an election year come into play.
“If you look at the hard data (retail sales, non-farm payrolls), the economy looks like it's doing well. But if you throw in some of the survey data, what people are saying is that things look like they're sinking,” Hogan said.
For example, Wall Street analysts and economists focus on sequential monthly inflation rates, while consumers tend to look at the numbers as a whole.
“It's the difference between me that inflation is only up 0.2% month-on-month, while consumers are looking at prices rising 20% from 2020,” the strategist said. Wages have increased 25 percent during that time, Hogan noted, “but people don't necessarily feel that.”
