By Lucia Mutikani
WASHINGTON, May 8 (Reuters) – U.S. job growth likely slowed in April as the boost from warmer weather and return of striking health workers faded, but that would not signal a material change in labor market conditions, with the unemployment rate expected to have held steady at 4.3%.
The Labor Department’s closely watched employment report on Friday is also projected to show wage growth picking up last month, which would further reinforce financial market expectations that the Federal Reserve would leave interest rates unchanged into 2027. Economists said it was too early for the effects of the U.S.-Israeli war with Iran to show.
The labor market has been stuck in what economists and policymakers have called a “slow hire, slow fire” zone. The paralysis has been blamed on President Donald Trump’s trade and immigration policies, and lately the war, which has raised gasoline and diesel prices as well as the cost of other commodities that are shipped through the Strait of Hormuz.
“The status quo holds, we haven’t had sufficient time for the war to dislodge demand for labor, which is typically determined months in advance of actual hiring,” said Joe Brusuelas, chief economist at RSM. “The Fed will take a look at the earnings … and most importantly the unemployment rate, and it will confirm the new consensus, which is we are not going to get rate cuts based on weakness in the labor market this year.”
Nonfarm payrolls likely increased by 62,000 jobs last month after rebounding 178,000 in March, a Reuters survey of economists predicted. Estimates ranged from a loss of 15,000 jobs to a gain of 150,000 positions. Payrolls have been choppy since mid-2025, alternating between gains and losses.
Economists have attributed part of the volatility to an adjustment this year to the birth-and-death model, which the government uses to estimate how many jobs were gained or lost because of companies opening or closing in a given month. Some said a large turnover in firms created was making it hard for the Bureau of Labor Statistics, which compiles the employment report, to estimate job creation associated with new companies.
Weather, strikes and government job cuts as well as big changes to the labor force as the Trump administration cracks down on undocumented immigrants have also added to volatility. Economists recommended looking at the three-month moving average of payrolls to get a better picture of the labor market.
“Averaging through recent months would still imply modestly positive job growth,” said Veronica Clark, an economist at Citigroup. “This alone would not be concerning given substantial change in immigration flows that have led to a much lower average pace of job growth this year.”
Job growth averaged 68,000 per month in the first quarter. Economists estimated that the economy needed to create between zero and 50,000 jobs per month to keep up with growth in the working-age population. With the so-called breakeven level of job growth much lower than in prior years, economists did not expect a surge in the unemployment rate, even if employment gains slowed considerably.
RURAL HOSPITALS ARE CLOSING DOWN
The healthcare and social assistance sectors likely continued to dominate employment growth last month, reflecting an aging population, though the pace of gains has slowed.
“A lapse in subsidies for the Affordable Care Act, curbs on Medicaid in many states, tariffs and a jump in the cost of H-1B visas for immigrant doctors and nurses are headwinds,” said Diane Swonk, chief economist at KPMG. “Rural and poor urban hospitals rely most on H-1B doctors and nurses to fill open positions. They cannot afford the new $100,000 fee for visas. Many rural hospitals have already closed.”
Manufacturing payrolls likely increased further amid a rise in activity linked to businesses frontloading orders in anticipation of higher prices and shortages from the Middle East conflict. Another decline is expected in government payrolls, which have dropped in nine of the past 12 months as the White House seeks to reduce the federal government footprint. But there is a push in some agencies to rebuild staff levels.
Wage growth is likely to have picked up, with average hourly earnings projected to have risen 0.3% after gaining 0.2% in March. That would lift the annual increase in wages back to 3.8% from 3.5% in March. While the strength in nominal wages would be consistent with a stable labor market, some economists pointed out it was partly driven by a shorter workweek.
The average workweek slipped to 34.2 hours in March from 34.3 hours in February. It was likely unchanged at 34.2 hours in April.
“This is one piece of evidence suggesting strong job growth is more reflective of technical factors than a true pick-up in activity and demand for workers,” said Citigroup’s Clark.
Stronger wages are being eroded by high inflation, with gasoline prices breaking above $4.50 a gallon.
As a result, some economists said labor-market stability was masking cracks in the economy, with lower-income households struggling to make ends meet. The economy is mostly being supported by higher-income households, whose wealth has been boosted by the stock market.
“People in the low end of the income spectrum have been suffering and cutting back,” said Sung Won Sohn, a finance and economics professor at Loyola Marymount University. “If people at the upper end of the income spectrum were to feel a similar way, the economy would be in trouble.”
(Reporting by Lucia Mutikani; Editing by Andrea Ricci )
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