As the U.S. approaches the release of the April jobs report, economists are on edge. They ring alarm bells about a growing precariousness that continues to enter and degrade the job market. As Andrew Challenger, Senior Vice President of Challenger, Gray & Christmas said, businesses are still scared to hire. This reluctance is due to the current economic uncertainty. Just when employment growth was looking up – averaging 152,000 jobs per month through March – strong headwinds appear on the horizon.
The Trump administration has been uniquely and profoundly disruptive on a range of policy areas. These mostly amount to big new tariff hikes and a freeze on federal hiring, creating an overall tense environment set for employers. Analysts are dusting off their crystal balls in anticipation of the next report. The recent surge in unemployment claims, combined with other developing dynamics, paints a complex picture of the contemporary labor market landscape.
Tariffs and Economic Policy Shifts
In April, the Trump administration took a dramatic new step in their trade war with China. They raised tariffs on imports to an unheard of 145%. The administration went further by setting a 10% baseline tariff on all imported goods and a 25% tariff on automobiles. On top of this, reciprocal duties were imposed on dozens of countries, which, at times, has only compounded the boom-bust cycle impacting hiring decisions.
Challenger noted that more broadly, these changes have induced fear and anxiety among employers. In broad strokes, companies are pointing to the economy and a wave of new technology. Employers are waiting longer before making final hiring decisions. They’re scaling back their own hiring plans as they look to see how things shake out with trade, with supply chains, with consumer spending, he said.
By March, Americans were already under the burden of tariffs. This was when the first round of tariffs on Chinese goods and global tariffs on steel and aluminum took effect. This lack of clarity could have affected employers’ hiring plans coming into the April jobs report. An unnamed source noted, “The payroll survey for the jobs report was conducted the week after the April 2 reciprocal tariff announcement, when uncertainty and volatility were extremely high, which could have weighed on hiring decisions.”
Rising Unemployment Claims
Recent data from the Labor Department has shown a concerning increase in unemployment claims. Weekly initial claims for unemployment insurance jumped to their highest level since late February. In the week ending April 26, there were 241,000 initial claims. Continuing claims increased as well, rising by 83,000 to 1.916 million, a new high since November 2021.
Even with these increasingly troubling numbers, experts are hesitant to make a direct link to major layoffs. The source said that Challenger, Gray & Christmas, an outplacement firm, has declared a record increase in layoffs. There has been a corresponding big jump in new unemployment insurance claims. “This has not led to any substantial uptick in unemployment claims, but surveys of both businesses and consumers have turned sharply negative in the last two months,” remarked Dean Baker.
Challenger noted that systematic job cuts across many sectors is no longer an outlier event. “Though the government cuts are front and center, we saw job cuts across sectors last month,” he said, emphasizing that employers are increasingly cautious.
Slow Growth and Job Cuts
As economic indicators reveal a slowdown in job growth, analysts are closely monitoring the repercussions on workers’ pay and benefits. Growth in compensation accelerated at the slowest rate in almost four years in the first quarter of this year. From the private to public sector, nearly 300,000 job cuts have been announced this year.
For March, U.S.-based employers announced plans to eliminate more than 105,441 jobs, noted the Challenger report. Specifically, job cuts by governmental agencies have gone up a staggering 680% from the same time last year.
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Elizabeth Renter, a senior economist at NerdWallet had this to say about these troubling trends. She stated, “The economy appears strong in the data… job growth is continuing, the unemployment rate is at a fine level. There are no warning signs there, but I think what the data doesn’t show is that the risks have increased.” Renter stressed that there are “a lot more and greater risks to the labor market” compared to previous months.
Looking Ahead
As analysts gear up for the release of the April jobs report, they have reason to be conflicted. Despite some of these indicators painting a resilient picture for employment figures, other indicators point to increasing risks that will likely affect hiring trends down the line. Robert Frick, a corporate economist for Navy Federal Credit Union, cautioned that things could get worse as the year continues. “Let’s not fool ourselves; things are going to get worse later this year,” he said.
Hope still abounds that the consumer–the engine of our economy–will spend just enough to keep us all safe from worst-case scenarios. Philly Fed’s Frick about the need to keep incomes and employment levels stable in a time of increasing economic uncertainty. “But for now, we really need to cross our fingers and hope that incomes and jobs hold up,” he added.