What to expect from April's US jobs report

The government's monthly jobs report, set to be released Friday, could hold some clues.

Economists polled by Refinitiv are forecasting a healthy but unspectacular 185,000 jobs added in April. The unemployment rate is expected to remain at 3.8%, just a hair above the nearly 50-year low reached last year.

The strong labor market has been great news for President Donald Trump. The latest CNN poll showed 56% of Americans say he's doing a good job on the economy, the best reading he's ever received.

But Mark Zandi, chief economist for Moody's Analytics said despite recent strength, the direction of hiring is pointing down — not up.

"It's a solid pace of growth. But the rate of growth is slowing," he said. In 2018, the average gain was nearly 225,000 jobs a month. So far this year, it's about 180,000. And he thinks the slowdown will continue.

"When you cut through the noise and volatility and you look out a year or two from now, it'll be below 100,000 a month," he said. "We should prepare for much slower job creation dead ahead."

Economists at PNC Financial Services agree with that assessment, predicting monthly job growth will slow to around 150,000 later in 2019 and below 100,000 in 2020 because of the tight labor market. That in turn, will weigh on the broader economy.

"Although the US economy is not in imminent danger of recession, growth is set to slow in the second half of 2019 and into 2020," they wrote in a note to clients.

There are now more job openings than there are job seekers to fill them. In some sectors, that tilts the labor market in favor of workers. In others, it creates an incentive for companies to invest more in automated processes that reduce their reliance on human labor. Robot janitors at Walmart, and self-service kiosks at businesses ranging from McDonald's to LabCorp are some examples.

Demographic factors, including a wave of retiring baby boomers, will also contribute to a slower job market ahead, Zandi said. Meanwhile, tighter immigration restrictions will limit the pool of workers arriving to fill open jobs.

"We're running out of workers. Businesses just can't find the people they need to fill these spots," he said.

The tighter job market is also lifting wages, which itself can slow hiring. Average hourly wages have been increasing by about 3% a year since August 2018. Economists are forecasting a 3.3% annual increase in Friday's report, a touch higher than in March.

That's much faster than the pace of inflation, which is up about 2%. That translates into real wage increases for the average worker that are "as strong as we've gotten in the last 20 years," Zandi said.

One concern is that the rising wages could force businesses to raise prices, which could prompt the Federal Reserve to raise interest rates to combat inflation. But Fed Chairman Jerome Powell said yesterday there were signs of inflation moderating, and he didn't seem overly concerned about wage pressures.

At a press conference Wednesday he said there are no signs of the economy overheating.

"You have wages going up at a rate that is appropriate," he said.