Key insights
- Bank of America forecasts a weak April jobs report (80k), but notes upside risks from ADP data. They expect unemployment to remain low (4.3%). A low unemployment rate would likely keep the Fed on hold, despite inflation risks. Weaker job growth could be mildly bearish for equities as it suggests a slowing economy, but the Fed's reaction function is key.
Investing.com -- Bank of America expects April nonfarm payrolls to show 80,000 new jobs, with private sector employment adding 90,000 positions, according to the bank's labor market preview released Tuesday.
The forecast comes after March job growth exceeded all expectations. Bank of America analysts said education and health care sectors will continue to drive employment gains, as artificial intelligence adoption has been slower in these areas and demographic trends provide support.
The bank expects the unemployment rate to hold at 4.3%, with a possibility of rounding down to 4.2%. The labor force participation rate is projected to remain at 61.9%.
Initial and continuing unemployment claims stayed low in April, including during the survey week for the jobs report. Despite recent technology sector layoff announcements, claims data showed little visible impact, suggesting overall layoffs remain low.
Weekly ADP data showed a sharp increase since late March, with April private sector job growth likely to reach between 120,000 and 160,000 positions, compared to 60,000 in March. Bank of America said the combination of low claims and rising ADP figures points to modest upside risks to its forecast.
Warmer weather may support hiring in leisure and hospitality, trade, transport and utilities, and construction sectors. Construction could also benefit from data center demand. However, uncertainty from the Iran war might weigh on hiring in some sectors, including leisure and hospitality, and trade and transport.
An unemployment rate of 4.3% or lower would keep the Federal Reserve on hold in the near term amid rising inflation risks, according to the bank.