Job growth seen bouncing back in April, but one trend in layoffs could continue

  • Jobs are expected to bounce back in April to 185,000 after a weak March.
  • Economists partly blame the weather for March's 98,000 jobs.
  • Retail jobs could continue to decline as brick-and-mortar stores close.
A customer signs for a purchase with a chip credit card at a Wal-Mart location in Burbank, California.
Patrick T. Fallon | Bloomberg | Getty Images
A customer signs for a purchase with a chip credit card at a Wal-Mart location in Burbank, California.

Job growth in April is expected to have nearly doubled over last month's weak level — if indeed the real culprits behind March's sluggish hiring were weather and holidays.

Economists forecast 185,000 nonfarm payrolls for April, up from a surprising 98,000 for March, according to Thomson Reuters. The unemployment rate is expected to rise to 4.6 percent from 4.5 percent, and average hourly wages are expected to grow by 0.3 percent, up from 0.2 percent in March. The employment report is released at 8:30 a.m. EDT Friday.

March's slump was surprising after several months of strong growth, and the three-month average is 178,000, which many economists see as being close to trend growth. But economists disagree on how much of March's slump will be made up in April.

Treasury yields were higher ahead of the report. Yields move inversely to price, and the 10-year yield pushed above 2.35 percent.

"The Fed needs the report to be good," said Aaron Kohli, rate strategist at BMO.

The April jobs report is the most significant second-quarter data after first-quarter GDP was reported to have grown by just 0.7 percent. Economists expect a bounce back in the second quarter and are looking for some signs of that in the payrolls. The report could also be important for the Fed, which indicated it viewed the first-quarter weakness as temporary.

One negative trend that could continue to show up is the decline in retail-sector jobs, as brick-and-mortar retailers shut stores and go bankrupt.

Diane Swonk, CEO of DS Economics, expects just 145,000 jobs, but she sees the trend more like 175,000. "There were a lot of retail closings, and this is the time when you tend to hire up, but you could have another retail loss," she said.

Goldman Sachs economists said retail employment growth has fallen from a historical trend of 15,000 to 20,000 per month to an average decline of 5,000 over the past six months.

"While some of the March weakness was likely weather-related, we expect the structural shift of retail sales from brick and mortar stores toward less labor-intensive e-commerce firms will continue to weigh on payroll growth in that industry, with the impact on the order of 10,000 per month, relative to its previous trend," the Goldman economists wrote. They said the drag from retail accelerated in the past two months — with a loss of 61,000 jobs — and that first-quarter sales trends at stores may be speeding up the shift.

The Goldman Sachs economists forecast 200,000 nonfarm payrolls for April and expect a weather-related boost of between 25,000 and 40,000 as workers returned to work after March storms. They noted that payroll growth in the New England, mid-Atlantic and eastern north central regions went to a negative 52,000 in March, from a gain of 102,000 in February. They said that likely reflected the impact of snowstorms in March and some give back of jobs in sectors that hired during an unusually warm February.

Barclays economists also expect to see a bounce back from weather.

"We're forecasting 225,000. We looked at a lot of the underlying details last month, and I think there's a couple of factors that suggest we could see a pretty solid bounce in employment," said Michael Gapen, chief U.S. economist at Barclays.

Gapen said, for instance, there were big declines in the manufacturing states of Ohio, Pennsylvania and Missouri. "We had a big rise in [unemployment] claims in those states. The April claims data showed those states had some of the biggest declines," Gapen said.

Gapen said the timing of the Easter and Passover holidays may also have been a factor. "We think that could be a factor in depressing, on a seasonally adjusted basis, some of the service-sector hiring," he said. "We also think construction, more broadly, had a weather effect."

Swonk said the federal government's ongoing hiring freeze likely reduced public sector payrolls by 10,000 jobs. She also said uncertainty over the Affordable Care Act, or Obamacare, may also have resulted in a slowing in health-care hiring.

"There was a slowdown in health care last month, and it's expected to slow again," she said. The House on Thursday voted to do away with Obamacare, but now the bill must pass the Senate, where it faces opposition.

"The labor markets are getting tighter, but there's a risk that the jobs number could be disappointing a bit," she said. "We got fooled by the 200,000-plus months, and the reality is you have to do a moving average. We're still pretty much on trend."

Watch: March jobs number