Forecasting higher payrolls in April

April 30, 2024

Payroll employment is expected to rise by 265,000 in April, after rising by 303,000 in March. The Big three - healthcare and social assistance, leisure and hospitality, and state and local governments - are expected to remain the drivers of overall employment gains. The three-month moving average for overall payrolls moved up from 212,000 in December to 276,000 in March. Payroll employment has accelerated since late last year.

The public sector is expected to add 70,000 jobs to payrolls in April, slightly above the pace that we have seen since the start of the year. Job postings by state and local governments outside of education remained extremely high at the end of April. State and local government coffers are flush with cash; 46 of 50 states exceeded their revenue expectations in fiscal 2023, while the majority expect to do so again in fiscal 2024. Illinois stands out as an example: It has had nine credit upgrades since 2020, while its rainy-day fund grew from $60,000 to $2 billion.

Private sector payrolls are expected to rise by 195,000, slightly above the pace of the last three months. Demand for healthcare and social services, which includes daycare, is chasing a moving target. We now have the largest generation of thirty-somethings on record; they are forming households and having families. An increase in immigration has helped fill staffing shortages in leisure and hospitality.

Manufacturing employment is expected to add 10,000 jobs, with some firming in manufacturing activity. The purchasing managers' indices have come off the lows we saw in 2023 and, depending upon the measure, are back in expansion territory.

The weak spots are expected to be in retail trade, transportation and warehousing and professional business services. This is a time of the year when we tend to hire up in those sectors, while job openings have cooled from earlier in the cycle.

Average hourly earnings are expected to rise 0.3%, the same as last month. That translates to 4.1% from a year ago, but the risk is to the upside. The minimum wage for some half a million low-wage workers in California was boosted from an effective rate of $17 to $20 per hour during the month. That could put some upward pressure on wages. Hours worked are expected to hold at 34.3 per week, the same as we saw in the first quarter, and 0.1 hour less than we saw in the fourth quarter.

Separately, the unemployment rate is expected to hold at 3.8% in April. Participation in the labor market is expected to edge up a bit to 62.7% in April from 62.6% March; a rise in participation by foreign born workers, who participate at higher rates than native born workers, is expected to drive that increase.

Those out due to childcare problems are expected to remain extremely elevated, along with those out on parental leave. What is classified as voluntary part-time remains extremely high, which many see as a sign of how strong the economy is. Sadly, those who are working voluntary part-time includes those who need to care for others, which is not always a choice. Work by ADP reveals that women have lost a whole hour of work each week since 2019, while the gap between hours worked between men and women widened. Caring for others is a major reason for that gap. Women with a high-school degree or less and women of color tend to be hit hardest by that trend.