After months of an extremely hot labor market, federal data on jobs and unemployment to be released next week will likely show a labor market that’s finally beginning to cool. 

Economists expect the report from the Labor Department to show 240,000 jobs added in March.  While robust by normal standards, the estimate represents a gradual slowing of the job market and the economy as a whole as rising interest rates set by the Federal Reserve begin to take effect. Many economists continue to expect higher interest rates to cause a recession later this year.

“We [at Bank of America] just think that the amount of disinflation that we desire, that policymakers desire, historically comes along with something that looks like a recession,” said Michael Gapen, chief economist at Bank of America. 

February’s jobs report showed 300,000 jobs added, with a historically low unemployment rate of 3.6%. Wage growth is also expected to decrease to 4.3%. 

The report will likely show increased hiring in a few specific economic sectors and downsizing more generally. According to Julia Pollak, chief economist at ZipRecruiter, the labor market slowdown has been broad, with industries such as hospitality and travel, which were largely affected by the pandemic, as notable exceptions. 

“A couple of industries are doing remarkably well, like restaurants and travel and hospitality,” Pollak said. “That are not just doing well, but that is extremely bullish and excited because they’re having their best first quarter ever.” 

Conversely, the industries that are feeling the slowdown are sectors that thrived during the pandemic and went on hiring booms, such as tech and information services. High-profile tech companies such as Google, Amazon, and Microsoft have all engaged in wide-scale layoffs, with more on the horizon. 

In conjunction with a slowing job market, wage growth is expected to slow, as employers have a larger pool of workers to choose from and can afford to offer less competitive compensation. 

According to Daniel Zhao, the lead economist at Glassdoor, recent economic turmoil caused by the implosion of Silicon Valley Bank and Signature Bank will not be felt in the jobs report for some time, as the survey recorded responses before the banking crisis occurred. 

While the jobs report will probably show a slowdown in March hiring, it will still reflect a surprisingly resilient economy. This indicates that the Federal Reserve, which recently raised interest rates by .25%, will continue its campaign to heighten borrowing costs in an effort to bring the jobs report down further, lower wage growth, and cool inflation. This will likely lead to pushing the economy into a mild recession and raising the unemployment rate in order to engender disinflation. 

“I’d be surprised that inflation came all the way back down to 2% without some temporary diminishing of labor demand and some backup in the unemployment rate,” Gapen said. 

Pollak, who also anticipates the economy moving into a mild recession following the Federal Reserve’s raising of interest rates, points to the expected economic downturn as to why restaurant and other leisure industries while hiring at robust rates, are still being somewhat cautious in their approach. 

“I think even in [hospitality] industries, employers are seeing news about the risk of recession being high,” she said. “And so while business volumes are high and they feel pressured to have staff to meet their sort of very immediate business needs, they’re all being quite conservative in hiring…restaurants and hotels have actually been quite cautiously conservative.” 

While economists have assessed and projected a slowdown in the job market, January’s and February’s jobs report far exceeded expectations. If that happens again, the Federal Reserve will have to tighten credit and borrowing costs even further to combat the high numbers, making the prospect of a recession all the more likely.