Economists are bracing for a significant cooling in the American labour market when the Bureau of Labor Statistics releases the May nonfarm payrolls report on Friday.
Analysts surveyed by Dow Jones expect just 80,000 jobs were added during May, a notable step down from the average of 150,000 across the prior two months.
April alone saw 115,000 jobs added, making the anticipated May figure a stark contrast to the relatively resilient hiring seen earlier in the year.
Some prominent Wall Street voices believe the month could feature a correction for a labour market that was already under pressure at this point last year, with risks skewed to the downside.
“We’re continuing to hear and see the low-hire, low-fire sentiment, which is that if you have a job, it’s OK right now,” said Laura Ullrich, director of economic research at Indeed Hiring Lab.
“People are continuing this kind of job-hugging trend. But if you’re looking for a job, it’s a very hard time to find a job because hires are so low,” Ullrich added.
Ullrich said she “wouldn’t be surprised” if the May number comes in at or below consensus, noting that the level of workers quitting their jobs is at its lowest since August 2020.
May saw a total of 97,006 planned job reductions, a 16% increase from April and the highest total for the month since 2020, according to Challenger, Gray and Christmas.
The firm also reported that artificial intelligence-related announced job cuts totalled 38,242 in May, the highest single-month total since Challenger began collecting the data roughly three years ago.
Goldman Sachs is forecasting payroll gains of just 60,000, noting that “big data indicators of job growth we track slowed” during the month.
Vanguard chief economist Adam Schickling is projecting a mere 20,000 new jobs, “as we expect a partial unwind from the strong [January]-April jobs numbers that were biased by unseasonably warm and dry weather.”
EY-Parthenon is forecasting growth of 50,000 jobs, with chief economist Gregory Daco noting that “the step down reflects some payback from earlier weather-related strength and a still-cautious hiring backdrop.”
Daco added: “We expect the unemployment rate to edge higher to 4.4%, consistent with a labor market where labor demand and supply have slowed in sync.”
The consensus sees the unemployment rate holding steady at 4.3%, though several forecasters now anticipate a modest rise given the scale of anticipated payroll weakness.
A result near consensus would almost certainly keep the Federal Reserve on hold, with markets pricing in virtually no chance of a move at the June 16-17 Federal Open Market Committee meeting.
“For the Fed, a stable labor market alongside still-elevated inflation raises the odds of a more hawkish, two-sided policy statement at the next FOMC meeting,” Daco said.
“Officials are likely to emphasize that rate hikes would remain on the table if inflation proves more persistent,” he concluded, underlining the increasingly two-sided nature of Fed policy risks heading into the second half of the year.