The robust job market is poised to achieve a significant milestone in April, matching the previous record for the longest period of low unemployment.
Economists anticipate that the April jobs report, scheduled for release by the Bureau of Labor Statistics on Friday, will indicate a stable unemployment rate of 3.8 percent. This would mark the 27th consecutive month of unemployment below 4 percent, matching a period of low unemployment from 1967 to 1970 and approaching the longest recorded stretch from 1951 to 1953.
"The labor market is currently in a very favorable position," said Joe Brusuelas, chief economist at RSM. "Employers are reluctant to let go of employees due to consistently strong overall demand."
In 2024, the labor market has shown robust growth, reversing the gradual slowdown seen last year, despite some parts of the economy facing challenges from high interest rates. Data from the Bureau of Labor Statistics indicates that the economy added approximately 30 percent more jobs on average each month in the first quarter of 2024 compared to the final quarter of the previous year. Additionally, average hourly wage growth accelerated in the first quarter of this year.
Employers have been anticipating lower interest rates later in the year, which could stimulate economic growth. As a result, they have been hiring proactively in sectors that experienced significant retraction after the COVID-19 pandemic, such as technology, transportation, and financial services. However, the overall strength of the labor market, combined with higher-than-expected inflation this year, has led the Federal Reserve to reconsider its plans to lower interest rates. The central bank announced earlier this week that it would leave interest rates unchanged for the time being.
Economists predict that the Fed will likely postpone rate cuts until the fall or later, as opposed to the previously expected summer timeline. In the meantime, high interest rates are expected to slow job growth and lead to rising unemployment later in the year.
Diane Swonk, chief economist at KPMG, described the prolonged period of low unemployment as "remarkable" and a positive aspect of the current economy. However, she noted that achieving balance between labor supply and demand through higher interest rates remains a challenging process. Swonk added that ideally, this process would not result in unemployment exceeding the Fed's target rate of 4.1 percent.
Economists attribute the unusually long period of low unemployment to several factors. The aging baby boomer population has sustained high demand for services as they retire and increase spending on leisure and healthcare. Additionally, federal stimulus measures, such as stimulus checks and major spending bills like the Inflation Reduction Act and the Chips Act, have boosted the economy despite challenges posed by higher interest rates.
"The unemployment rate being below 4 percent for over two years now underscores the effectiveness of full employment and running a robust economy," said Andrew Flowers, a labor economist at Appcast. "It's largely been the public and federal stimulus that has facilitated this."
The most recent extended period of low unemployment was from 2017 to 2019, as the economy rebounded from the Great Recession during Donald Trump's presidency. The pandemic disrupted this trend.
There are indications that the labor market has cooled since the initial post-pandemic recovery, particularly in terms of job turnover in the U.S. workforce. In March, job openings reached their lowest point in over three years, according to the Labor Department. Additionally, the number of workers quitting their jobs continued to decline, suggesting that workers may have lost some leverage in the job market compared to the period of the "Great Resignation."
One factor contributing to the ease in hiring has been a significant increase in immigration, which has helped fill longstanding job vacancies. However, new immigrants often find jobs in the informal economy and may not be included in official unemployment rate calculations, potentially leading to an underestimate of the actual jobless rate.
Despite potential economic slowdowns and tightening labor markets, companies appear to be retaining workers, with layoffs remaining near historic lows for months. Economists suggest that employers are keen to retain workers, especially after experiencing persistent labor shortages in recent years.
Several key service-related sectors continue to drive the majority of job growth, while other industries show signs of recovery. Sectors such as healthcare, government, education, leisure and hospitality, and social services have experienced significant growth, supported by strong consumer spending and government funding. Healthcare, in particular, has seen substantial job creation, accounting for a quarter of the 2.9 million jobs created in the past 12 months, largely due to the increasing demands of the aging baby boomer population.
"There's a divide in the labor market between active and sedentary jobs," noted Flowers. "Job growth in direct care and manual labor is strong, while we continue to see weakness in information and professional business services."
Within healthcare, the growth has been particularly notable in nursing and residential care facilities, where employers still struggle to retain workers.
Tisheia Frazier, a certified nursing assistant in Wynnewood, Pa., works in the dementia unit of a nursing home. She mentioned that the facility has been consistently understaffed since before the pandemic, a situation that has worsened over time. Previously overseeing 15 residents per eight-hour shift, Frazier now looks after 23.
Frazier noted that many of her colleagues have quit since the pandemic due to the demands of the job, including bathing, dressing, and assisting residents, all for low pay. Despite her 12 years of experience, she earns $19 an hour. Between her income and her husband's as a cook at the same facility, they barely cover childcare for their 4-year-old and food expenses.
"You're responsible for people's mental, physical, emotional, and spiritual well-being," Frazier said. "I have residents who cry at night because they're confused. I know what I'd do if I had half an hour to spend with them. In reality, I give them a hug, reassure them, and then I have to leave."