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Key Takeaways
- A government report that is highly anticipated will show the job markets grew steadily throughout April.
- Economists expect 133,000 jobs were added to the economy, but anything under six figures could indicate President Donald Trump's tariffs are eroding the economy faster than forecasters had anticipated.
- Uncertainty regarding future tariff policy has caused businesses to delay investments and hiring, resulting in a weakening of job growth.
A closely watched report on the labor market, due out this week, may indicate whether President Donald Trump’s new tariffs are hurting job creation.
According to a Dow Jones Newswires/The Wall Street Journal poll of economists, a report on payrolls due from the Bureau of Labor Statistics on Friday is likely to show that the U.S. has added 133,000 jobs to its economy in April. This would be a slowdown from the 228,000 unexpectedly high jobs added in March but would still be the second highest pace of job growth for the year. Economists predict that the unemployment rate will remain at 4.2%. This is within the small range of 4.2% it has maintained since May last year, and is not high by historical standards.
Unexpectedly low job creation could be a sign that Trump’s trade tariffs are dragging the economy down faster than analysts had expected. Many experts predict a slowdown in hiring and a rise in layoffs due to the tariff policies in place. Employers say they have put off investments and expansions while they wait for the tariff policy.
How do tariffs factor in?
The April jobs data is not expected to show much movement by economists, even though Trump’s levies were implemented that month. The economists said that Trump’s “Liberation Day”, tariffs (announced in April and partially paused in April 9), could have an impact.
In a comment, economists Oliver Allen and Samuel Tombs of Pantheon Macroeconomics wrote: “It would be extraordinary if the employment situation in this year was not affected by the increase in import tariffs, the fall in asset prices, and the extreme economic uncertainty that is likely causing businesses to delay non-essential expenditure.” “None of our regular coincident indicators for payrolls has weakened significantly yet.”
The jobs report will be one of many economic reports that will be released in the coming week, including the Gross Domestic Products, inflation, manufacturing, and consumer confidence surveys. The jobs report will be the most important for the economy’s trajectory and whether or not it is headed for recession.
Mark Zandi is chief economist at Moody’s Analytics. He posted a message on social media. “Fingers crossed. Watch out if the increase in employment is less than 100k.
Federal Reserve Officials will be closely watching jobs data
Federal Reserve officials will be among those "watching out" for signs that the job market is weakening.
Fed policymakers follow the central bank’s dual mandate of controlling inflation while maintaining high employment. They have been watching to see if there is a problem with the job market. A downturn could force the Fed to change its “wait and watch” approach and cut interest rates in order to boost the economy.
So far this year, the Fed has kept interest rates higher than usual to subdue the last remnants of the post-pandemic inflation surge, which is still running above the Fed's target of a 2% annual rate.
If the job market remains strong, the Fed may keep borrowing rates high at its May policy committee meeting.
"A solid April employment report will encourage the Fed’s patient approach to resuming rate cuts," Jeremy Schwartz, research analyst at Nomura, wrote in a commentary. "We expect employment growth will continue to slow, and the uncertain headwinds from tariffs, deteriorating business sentiment, and federal layoffs leave risks skewed towards a sharper downturn."
