U.S. job growth is likely to decelerate in April amidst heightened economic uncertainty caused by President Donald Trump’s aggressive tariff policy, even though companies continue to retain workers, keeping the labor market active for the time being.
However, the Labor Department’s closely watched employment report on Friday is likely to be viewed as retrospective and will probably not provide a clear indication of the economy’s current state, especially after gross domestic product contracted in the first quarter due to a surge in imports as businesses attempted to anticipate tariffs.
Trump’s April 2 “Liberation Day” tariff announcement introduced sweeping duties on most imports from U.S. trade partners, including raising duties on Chinese goods to 145%, sparking a trade war with Beijing and tightening financial conditions.
Trump later postponed higher reciprocal tariffs for 90 days, which economists described as essentially a pause on the entire economy, leaving businesses in a state of paralysis and risking a recession if clarity is not provided soon.
“This is a situation where the air in the balloon is slowly dissipating out,” said Brian Bethune, an economics professor at Boston College.
“There’s a certain amount of labor hoarding that’s going on despite the uncertainty across so many different dimensions, on the anticipation that somehow there will be some clarity in terms of direction of policy.”
Nonfarm payrolls likely increased by 130,000 jobs last month after rising by 228,000 in March, according to a Reuters survey of economists.
Estimates ranged from 25,000 to 195,000 jobs added. Part of the anticipated slowdown in payrolls is attributed to the waning boost from warmer weather.
The pace of job gains would exceed the 100,000 that economists say are needed to keep up with growth in the working-age population. The unemployment rate is forecast to have remained unchanged at 4.2% last month.
While the labor market continues to show resilience amid employers’ reluctance to lay off workers after struggling to find labor during and after the COVID-19 pandemic, warning signs are accumulating.
Business sentiment continues to decline, which economists expect will eventually lead to layoffs. Airlines have already revised their 2025 financial forecasts, citing uncertainty over spending on nonessential travel due to tariffs.
General Motors reduced its 2025 profit forecast on Thursday and indicated it expects a $4-$5 billion tariff impact.
China has instructed its airlines to halt further deliveries of Boeing planes, while Ryanair, Europe’s largest low-cost carrier, warned on Thursday that it might cancel orders for hundreds of Boeing aircraft if the tariff war results in significantly higher prices.
Amid the uncertainty, the Federal Reserve is expected to maintain its benchmark overnight interest rate in the 4.25%-4.50% range next week.
Policy Uncertainty
Economists anticipate that companies will reduce work hours before resorting to layoffs. The average workweek has been steadily decreasing since 2023 and remained steady at 34.2 hours in March.
“How much can the labor market absorb and handle this uncertainty that the administration has injected into the economy?” asked Martha Gimbel, executive director of the Budget Lab at Yale.
“American businesses are resilient, and there’s a lot that they can overcome, but they can’t overcome everything, and at some point, the policy environment is going to really start to bite.”
Most economists expect the tariff impact to become evident in the “hard data,” including employment and inflation reports, by summer. Surveys from the Institute for Supply Management, the Conference Board, and the University of Michigan have consistently painted a bleak economic picture.
The Trump administration’s unprecedented and often chaotic campaign, led by tech billionaire Elon Musk’s Department of Government Efficiency (DOGE), to drastically reduce the federal government through mass layoffs and deep funding cuts is adding to the rising labor market risks.
Some of the spending cuts have affected schools and medical research. The government and healthcare sectors have been key drivers of employment growth. The labor market’s resilience is likely to be underscored by solid wage growth.
Average hourly earnings are forecast to have risen by 0.3%, matching March’s gain. That would increase the annual wage growth to 3.9% from 3.8%. This has left some economists optimistic that the economy could avoid the dreaded stagflation—tepid growth and high inflation—or even a recession.
“Generally when there is stagflation, we haven’t seen the labor market be as resilient as it is today,” said Elizabeth Crofoot, a senior economist at Lightcast.
“As long as people have jobs, as long as their incomes are not necessarily rising, but steady, and they feel like they can absorb some of the price increases that’s going to allow the economy to be resilient.”
