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ORLANDO, Florida, June 4 (Reuters) - The U.S. jobs market has long been characterized as "low hire, low fire," with weak labor demand offset by shrinking labor supply after the Trump administration's immigration crackdown. But this delicate balance may be shifting in a positive direction.
A clutch of recent employment indicators is tentatively pointing up, and there is little evidence of an AI-driven "jobpocalypse" – at least not yet.
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This puts a spotlight on the May non-farm payrolls report due on Friday, which is expected to show a net increase of 85,000 jobs and the unemployment rate holding steady at 4.3%. Compared with where the labor market stood at the end of last year, that would be a solid outcome.
Monthly job gains averaged 76,000 in the first four months of this year. That's not outstanding by historical standards, but it marks a notable improvement from last year's average of just under 10,000.
More importantly, it is well above the pace needed to prevent the unemployment rate from rising. This so-called "breakeven" rate has fallen so sharply that economists now reckon it is close to zero, the lowest in over 65 years, according to a Federal Reserve paper in April.
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The same paper added that payrolls could fall by as much as 100,000 in one or more months this year, even if the economy were growing at potential. Set against that scenario, the 85,000 forecast for May and the current year-to-date average look like bumper numbers.
A column chart with the title 'Reuters Poll: US nonfarm payroll'
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REASONS TO BE CHEERFUL
Most recent indicators have been encouraging too.
The so-called "JOLTS" data this week showed that job openings in April were the highest in two years, with the fastest rate of increase in six years. There is a caveat: most of those positions were in one sector. Still, it was the first time since last June that vacancies exceeded the number of unemployed workers, Bank of America economists note.
Meanwhile, ADP private sector payrolls figures showed a 122,000 rise in jobs last month, the strongest growth since January last year. Again, caveats are needed: the ADP numbers exclude the government sector and have therefore been stronger than the national payrolls figures since President Donald Trump returned to the White House.
But regardless, the signals are positive and, importantly, they're not showing any sign of AI-related job losses.
Finally, revised Quarterly Census of Employment and Wages data for the fourth quarter of last year showed employment was slightly stronger than previously thought. That suggests employment growth in the 12 months to March could be revised up – by at least 20,000 a month, according to JPMorgan – a marked change from the hefty downward revisions of recent years.
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Payrolls, actual v estimated
BREATHING ROOM
Tim Duy, chief U.S. economist at SGH Macro Advisors, says that cyclical employment bottomed out around the summer or fall of last year. The labor market, he says, "has likely turned durably stronger."
Duy points to the latest JOLTS report as a leading indicator: more job openings typically lead to more hiring, which should encourage more people to leave their positions, creating even more openings.
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This would get the labor market moving again and lift it out of its "unusual and uncomfortable" balance, as former Fed Chair Jerome Powell characterized it in April.
In fact, the jobs market may be in something of a sweet spot right now for Powell's successor Kevin Warsh. Employment growth appears to be picking up, reducing the pressure to lower interest rates, but it is not doing so fast enough to stoke inflation concerns.
Inflation pressures in the U.S. are intensifying, but from the energy shock, tariffs and other supply issues, not from wages. Average annual earnings growth has been trending lower for three years, and with inflation approaching 4%, real earnings growth is now negative.
Despite all this, there are still reasons to remain concerned that the "low hire, low fire" labor market could morph into a "no hire, all fire" spiral. These include the still unfolding global energy crisis, fears of an AI bubble and the unknown impact of this new technology on jobs.
Figures on Thursday from global outplacement firm Challenger, Gray & Christmas offered a warning: U.S.-based employers announced 97,000 job cuts in May, the most for that month since 2020.
But reasons to be optimistic are emerging. Will Friday's employment report be another?
(The opinions expressed here are those of the author, a columnist for Reuters)
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By Jamie McGeever Editing by Marguerita Choy
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
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Jamie McGeever has been a financial journalist since 1998, reporting from Brazil, Spain, New York, London, and now back in the US again. His experience and expertise are in global markets, economics, policy, and investment. Jamie's roles across text and TV have included reporter, editor, and columnist, and he has covered key events and policymakers in several cities around the world.
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