The First Labor Statistics Results of the Fiscal Year 2019: The US Employment Rate Rises 59% in March, versus Expected 430,000 in March
The Federal Reserve’s yearlong effort to cool inflation is showing some signs of wear and tear as the ride shows some signs of wear and tear.
Most of the layoffs have come from technology firms, which have been scaling back their workforce after over-hiring during the Pandemic. Financial companies announced the second-most job cuts year-to-date with 30,635, according to the Challenger Report.
“I think the image, for me, that most sums up where we are in the labor market is the image tweeted by Bloomberg’s chief economist, which shows that mentions of job cuts are now higher than mentions of labor shortages in earnings calls,” said Julia Pollak, chief economist at online employment site ZipRecruiter. After 2021, there was much a shortage of labor in the area, so everyone was talking about how hard it was to find work.
The Bureau of Labor Statistics will release their March jobs report on Friday and it is likely to show more of a shift than previously thought.
A net gain of 239,000 jobs for the month was expected, while the unemployment rate was forecast to be 3.6% by Refinitiv. The first jobs report of the year came in below expectations.
The number of job openings in the United States dropped to 10 million for the first time in over a year and a half on Tuesday. BLS found that the number of jobs available fell to 9.93 million in February.
Online job postings have retreats in the last few weeks. Data from the Indeed Hiring Lab shows that as of March 24, postings — both overall and new — are down from a month prior.
Additionally, the share of postings advertising benefits such as health insurance, paid time off and retirement plans has tapered off, Nick Bunker, Indeed Hiring Lab’s head of economic research, told CNN.
Employers are pulling back from a year of strong hiring, and pay growth is slow after a three-month lull, according to a statement from the chief economist at Automatic Data Processing.
And on Thursday morning, Challenger Gray & Christmas reported that US employers announced 89,703 jobs cuts in March, a 15% pickup from February and more than three times what was reported a year before (when the labor market recovery was still in full swing).
The continuing claims, which are for people who have been out of work for more than one week, rose to 1.823 million for the week ended March 25, marking the highest level in over a year. Economists were expecting 1.699 million, according to Refinitiv.
The overall strength of the job market — and ongoing demand in underemployed industries like leisure and hospitality as well as health care — more than offset the losses seen in tech and finance.
Daniel Zhao, lead economist at Glassdoor, told CNN that it does not require that other banks fail in order for an impact to be seen. If banks pull back on lending to businesses and that prevents them from continuing to grow their staff, then we might see an impact on the labor market because those ripples will be felt throughout the economy.
Some potential red flags could include: If the headline jobs number falls between zero and 200,000, and if the unemployment rate jumps by 0.2 percentage points or more.
“I think the concern then is that starts to look more like the start of a recession, because we did already see a 0.2 percentage point increase [in the jobless rate] from January to February,” he said. “So if we see another one, that does start to add up.”
Economists, by and large, are still factoring in a recession later this year. And even though it’s most likely to be “short and shallow,” the recession will affect some industries more than others, according to new research from the Conference Board.
The Job Loss Risk Index is an indicator of the extent to which certain industries will suffer the greatest employment losses during a recession.
The next tier of industries classified with a “high” risk include: repair, personal and other services; manufacturing; wholesale trade; and real estate. Private educational services, health care, public sector employment, retail, food services and the arts and entertainment are all industries with a very low risk.
Telework and e- commerce boomed as employment in these industries ballooned. As people have returned to work, the environment has changed. Additionally, high interest rates have made borrowing more costly and weakened industries such as housing.
Labor Market Snapshot before Fed Rates: The US Labor Market is Tight Against The Covid-19 Pandemic, Even During the First Two and Half Years
Friday’s jobs report is the last monthly employment snapshot before the Fed’s next policymaking meeting on May 3 and 4, since April data will be released May 5.
In a note to clients, Oxford Economics lead US economist Nancy Vanden Houten wrote that while the March report will probably show a continued slowing in the labor market, it probably won’t deter the Fed from approving a third-straight rate hike in May.
Oxford Economics says the Fed rate hikes in June and May will be more up in the air because of banking sector stress.
In March, US employers hired 236,600 workers, below expectations and a sign the labor market is cooling off due to the Fed’s year-long campaign to chill inflation.
While the US labor market has kept trucking along despite other areas of the economy slowing under the weight of interest rate hikes, it is showing some signs of cooling.
The Fed wants to see more slack in the labor market: As the economy recovers from the pandemic, the demand for workers has far exceeded the supply, contributing to higher wages and inflationary pressures.
Contributing to the tightness has been a smaller-than-expected labor force and participation rates that were slow to match projections or meet pre-pandemic levels.
During the past two and half years, a lot of ink has been spilled on the question of why workers were “missing,” with recent research zeroing in on Covid-19 deaths, reduced immigration, aging population and long Covid as the primary culprits.
The labor force participation rate for workers between the ages of 25 and 54 was 83.0% in February, which is above pre-pandemic levels. And last month, the overall labor force participation rate continued its upward march, increasing to 62.6% and matching a pandemic-era high. But that’s still below the February 2020 rate of 63.3%.
Average hourly earnings grew 0.3% from the month before, a slight uptick from the 0.2% seen in February. The earnings increase moderated to 4.2% on an annual basis from 4.6% the month before.
The unemployment rate dipped to 3.5% in March, from 3.6% in February, even as 480,000 new people joined the workforce. The unemployment rate for African Americans fell to 5% — the lowest level since the government began tracking the figure in 1972.
72,000 new jobs were created in the Leisure and Hospitality sector in March, including 50,000 in bars and restaurants. By contrast, retailers shed 15,000 jobs. Construction companies and factories also saw modest declines in employment.
Inflationary Worrying About the Economy and the Low-Carbon Yield of the United States, and Implications for Pay and Social Security
The Federal Reserve has been raising interest rates aggressively in an effort to curb inflation. The Fed is particularly worried about the rising price of services, which is largely driven by rising wages.
The hiring rate is expected to continue to slow as banks become more cautious in their lending due to the recent bank failures.