Economists predict tepid job gains for April

Economists are forecasting tepid job gains for April, which might be a reflection of concerns that employers have about tax hikes and across-the-board spending cuts. 

{mosads}While another disappointing report on Friday could simply be the product of seasonal factors, economists said worries about the payroll tax increase and the $85 billion sequester cut that went into effect on March 1 are starting to emerge in the figures.

Although estimates for job gains are ranging as high as 160,000, Mark Zandi, chief economist of Moody’s Analytics, told The Hill that he is expecting job gains of 120,000, with the unemployment rate remaining at 7.6 percent. 

Any figure below that could be “due to greater fallout from the intensifying fiscal drag, including the tax hikes and spending cuts,” he said. 

A better figure could reflect a weather rebound after a cold March. 

“Employment growth is slowing as the fiscal headwinds mount,” Zandi said. “The tax increases and government spending cuts are starting to hit the economy and are causing businesses to downshift their hiring.”  

He said job growth is slowing across most industries, including manufacturing that is most likely being hit by cuts to defense spending and continued financial problems in Europe and slow growth in Asia. 

While underlying job growth was running at about 175,000 a month through early this year, Zandi is expecting that pace to slow to about 125,000.

Job gains were an anemic 88,000 in March, a figure that dumbfounded economists. Some estimated that cold weather weighed on the retail sector, while others surmised that it could be an indication of a weakening economic recovery. 

Friday’s report from the Bureau of Labor Statistics will show revised figures for March, possibly providing a better glimpse into what happened based on which direction the figure shifts. 

Keith Hall, the former head of the BLS who is now a policy expert at George Mason University, said April could be tough to “forecast because we’ve had real up-and-down job growth so far this year.”  

“Much of this I think was due to difficulties forecasting the seasonal factors,” he told The Hill. 

He expects April jobs growth to slow to around 135,000 — about in the middle of March’s 88,000 and the monthly average, so far this year, of 168,000. 

He is expecting the jobless rate to tick up to 7.8 percent after last month’s significant drop in labor force participation that drove the decline. 

William Dunkelberg, chief economist for the National Federation of Independent Business (NFIB), said a survey of his group’s members shows that “April was another positive, albeit lackluster month for job creation — but small-business owners are expressing a bit more enthusiasm in hiring plans in the months to come.”

The brightest news out of the latest NFIB report is that job creation plans rose 6 points, to a net 6 percent of small employers now planning to increase total employment in the next three months. 

“This is a nice improvement over the 4 point decline in hiring plans we saw in March,” Dunkelberg said. 

“Perhaps the ‘frost’ in March didn’t do as much damage to the ‘green shoots’ as many had feared. But we’ll see. Owners remain pessimistic and wary about the future of the economy and see little reason to hire relative to what would be expected in the fifth year of an expansion.”

Another complication in boosting the slowly improving job market is the challenge faced by employers to fill open positions with qualified workers. 

Almost half (49 percent) of owners surveyed hired or tried to hire in the last three months, and 38 percent (78 percent of those trying to hire or hiring) reported few or no qualified applicants for open positions, according to the NFIB survey. 

In a recent Brookings paper, scholar Darrell West examines the phenomenon of worker shortages versus the high national unemployment rate, where worker vacancies exist and how they can best be filled to help companies grow and expand.

West argues that there are two potential ways to fill these gaps that include retraining U.S. workers to ensure that their skill sets match the needed requirements and hiring foreign workers with the skills and mobility to fill the existing gaps. 

He says that the policies complement rather than conflict with one another.

The report shows that shortages exist in several important sectors of the economy — agriculture, healthcare, manufacturing and technology. 

“These shortages cannot be filled by available American workers, even with high unemployment across the nation, due to retirements, demographic gaps, geographic differentials, and the failure of educational institutions to deliver,” the report says.