Friday’s Jobs Report: How Long Can Wages Hold?

May 1, 2018

Last month, a weak March BLS jobs report surprised many analysts with just 103,000 new jobs added by employers. Should we expect to see more of the same in April’s report? Here’s what we’ll be watching for this Friday:

  • +164,000 new jobs added to nonfarm payrolls in April;
  • Unemployment rate down slightly to 4.0 percent;
  • Average hourly earnings up 2.7 percent from one year ago;
  • Labor force participation rate steady at 62.9 percent.

Despite weaker than expected job gains in March, the U.S. labor market remains the strongest it has been in a generation. Today’s 4.1 percent unemployment rate hovers near a 17-year low. The economy has added jobs for 90 consecutive months, an all-time record since the Labor Department began publishing jobs data in the 1930s. And last week, new claims for unemployment insurance fell to the lowest level since 1969 — a 48-year low.

So far this year, the economy has added an average of 202,000 new jobs to payrolls per month. That’s a remarkably strong pace for an economy that’s nearly nine years into an economic expansion with a dwindling number of available workers to hire and is nearly twice the “break even” pace of job gains the economy needs to stay at full employment. In April, we’re expecting to see another month of moderate job gains: 164,000 new jobs added, pushing down the nation’s unemployment rate to 4.0 percent.

Wage growth is one key area many analysts are watching closely. Why? Despite the indicators that show a strengthening job market, wage gains have largely stagnated over the past year, with few signs of workers bargaining for higher pay in today’s robust hiring environment. Last month, we saw a slight uptick in BLS average hourly wage growth to 2.7 percent year-over-year, up slightly from the stubbornly flat 2.5 percent pace we’ve seen over the past year. According to Glassdoor’s Local Pay Reports, wage gains picked up slightly in April, and we expect to see a similar trend in the BLS survey on Friday, with average wages again up 2.7 percent from a year ago.

With roughly 6 million open jobs in the U.S. today, employers are struggling to fill open roles, putting many in-demand workers in tech, health care and professional services in a historically very strong bargaining position with recruiters. How long can the economy run hot without sparking widespread wage gains? Nearly all of the remaining slack from the last recession is now gone from today’s labor market, making it unlikely that wage pressures can remain muted for much longer — something we’ll be watching for closely this summer in salaries reported by job seekers on Glassdoor.

To speak with Dr. Andrew Chamberlain about this month’s jobs report or labor market trends, contact pr [at] glassdoor [dot] com. For the latest economics and labor market updates, subscribe to email alerts here and follow @adchamberlain.