A wawa store hiring signs in Bethany Beach, Delaware.
Stephanie Dhue | CNBC
The economy could create more than 1 million jobs in April, say economists.
Attitudes appear to have strengthened with the reopening of businesses, leading some economists to make big predictions about the number of jobs added during the month. The April employment report is expected on May 7th.
Employment growth accelerated to 916,000 in March, and some economists believe this trend has continued. The number of people applying for unemployment benefits for the first time fell to a new pandemic low of 553,000 in the week ending April 24.
Now that nearly 30% of Americans are fully vaccinated, more businesses are reopening, air traffic is increasing, and foot traffic in retail stores is increasing.
If non-farm wage increases exceed 1 million, it would be the first time since last August, before the second wave of Covid hit in the fall.
“There’s a ton more capacity in the restaurant industry right now because of restaurant bookings,” said Tom Simons, Jefferies money market economist. “That can’t be done if no one is working. You literally cannot fulfill these bookings without workers.”
Jefferies economists are forecasting employment growth of 2.1 million in April, by far the highest estimate on Wall Street.
Evercore expects employment to increase by 1 million jobs. Morgan Stanley economists are forecasting 1.25 million and Capital Economics is forecasting a profit of 1.2 million.
Morgan Stanley economists said their forecast was influenced by the decline in unemployment claims.
“Similar to March, we expect wage increases to be largely due to modest hiring increases coupled with a larger drop in the layoff rate,” they write.
Capital Economics also said the data on unemployment claims was compelling.
“As a result, we anticipate a major increase in non-farm payrolls of 1.2 million, although that would still put employment 7.2 million below pre-pandemic levels in February 2020,” wrote the US chief Capital economist Michael Pearce. “With restrictions still being eased in some states, we expect the deficit to continue to shrink rapidly as the economy quickly recovers jobs in the hardest hit sectors.”
The robust projections for employment growth are set against the backdrop of a booming economy. In the first quarter the gross domestic product grew by 6.4% and for the second quarter by up to 10%.
Leisure, Restaurants and Retailers
Michael Gapen, chief US economist at Barclays, expects 950,000 employees. Gapen said payrolls continued to rise in April due to tax incentives, vaccinations, falling Covid case numbers and easing of restrictions.
“I think it’s been a good month,” he said. “The models wanted something between 900,000 and 1 million. We believe the risks to that forecast are positive.”
Gapen said if the number is weaker than expected, he would be concerned about rising infection rates.
“That is the limiting factor for me in the short term,” he said. “I think the hiring rate will be very high in April, May and June and will slow down a bit after that. I think companies need to hiring here.”
Retailers and restaurants, as well as others in the leisure industry, are expected to have created many jobs. However, there is concern that expanded unemployment benefits make it difficult for employers to attract workers.
“If our forecast poses a risk, we have not overestimated the progress in the reopenings,” said Simons. “It’s more that people have come back to work or that these companies are seeing massive increases in productivity to do the same business with fewer people.”
Grant Thornton’s chief economist Diane Swonk reckons with around 800,000 jobs and says April wasn’t quite as euphoric as March.
“It’s going to be a tough month,” she said. “We may not get a million, but it’s going to be a strong month.”
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