The March Jobs Report: The First Four Months Reversing After a Big Reversal After 2021 and 2022 After The Labor Shortage Recession
But that once high-octane ride is showing some signs of wear and tear amid the Federal Reserve’s yearlong efforts to cool inflation by suppressing demand.
Almost half of the layoffs have been in the technology sector, which is scaling back sharply after hiring too much. 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. “That’s a big reversal after 2021 and 2022 were very much the years of the labor shortage and everyone was talking about how they were struggling to find workers.”
When the Bureau of Labor Statistics releases the March jobs report on Friday, it will become even clearer how much has changed.
Economists expect the monthly job gains to slow, with consensus estimates coming in at 239,000. That would be a notable reduction from February’s 311,000 jobs gained and a sizable drop from the monster 504,000 net gain in January.
The number of openings in the United States went from 10 million to 9 million for the first time in over a year and a half. According to the BLS, there was a decrease in the number of jobs available in February.
In the last few weeks, online job postings show a similar retreat. The Indeed Hiring Lab shows new postings are down from a month prior.
Nick Bunker, head of economic research for Indeed Hiring Lab, told CNN that health insurance, paid time off, and retirement plans no longer appear in the vast majority of postings.
“Employers are pulling back from a year of strong hiring; and pay growth, after a three-month plateau, is inching down,” Nela Richardson, ADP’s chief economist, said in a statement.
According to the research firm Challenger Gray and Christmas, US employers announced 89,703 jobs cuts in March, which was more than three times the number that was announced a year before, and a 15% pickup from February.
The weekly total was 228,000, which was down from the upwardly revised total the previous week but still above the economists expectations of 200,000. (Starting with Thursday’s report, the Labor Department made a series of significant revisions to recent years’ data to better account for pandemic-era dynamics).
“The gains we continue to see in health care and leisure and hospitality are because those industries are still trying to recoup earlier losses,” said Diane Swonk, chief economist at KPMG. The services sector held up but showed some signs of cooling.
The lead economist at Glassdoor told CNN that it doesn’t necessarily require the failure of other banks to have an impact. If banks pull back on lending to businesses, and that prevents businesses from growing their payrolls, then we might see that affect on the labor market, as those ripple effects from banking troubles began in March.
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.
The concern is the start of a recession because we already saw a 0.2 percentage point increase. He said the unemployment rate would be from January to February. That adds up if we see another one.
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 business membership and research group this week launched the Job Loss Risk Index, which estimates what industries could suffer the largest employment losses during a recession.
According to the organization’s findings, the industries with the highest risk include information services, transportation and warehousing, and construction.
Employment in these industries ballooned during the pandemic as telework and e-commerce boomed. The environment has changed because people have returned to work and shifted their spending to service-oriented industries. Additionally, high interest rates have made borrowing more costly and weakened industries such as housing.
Labor Market Sliding and the Fed’s Rate Hike: The Last Employment Snapshot Before the Fed Opens May 2 & 3
Friday’s jobs report will be the last monthly employment snapshot before the Fed’s next policymaking meeting on May 2-3, since April data will be released May 5.
And while the March report will likely show a continued slowing in the labor market — notably wage gains and job growth — it probably won’t dissuade the Fed from approving a third-straight quarter-point rate hike in May, Oxford Economics lead US economist Nancy Vanden Houten wrote in a note Tuesday.
Oxford Economics is of the opinion that the Fed will increase rates in May and June due to banking sector stress.
US employers added just 236,000 jobs in March, coming in below expectations and indicating that the labor market is cooling off amid the Federal Reserve’s yearlong rate-hiking 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 under the age of 25 hit 83.2% in February, which is above pre-pandemic levels. The labor force participation rate increased to 62.6% last month, the highest it has been since the mid-’90s. But that’s still below the February 2020 rate of 63.3%.
On average, hourly earnings grew from the month before to the month before, with a slight increase from February. In the month of October, earnings increased 4.6%, but they moderated to 4.2% for the year.
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 ever tracked by the government.
Leisure and hospitality employers added 72,000 jobs last month, the most of any industry. But the sector is still 2.2% below pre-pandemic staffing levels and added a smaller-than-average number of jobs in March than in the six prior months.
The Economy of Construction: Job Losses and Supply Pushing in a Strongly Underlying Economy after the First Fed Rate Inflationary Crisis
The Federal Reserve has been trying to slow the rate of inflation. The rising price of services is a concern for the Fed.
The hiring of people is going to get harder in the coming months, as banks are less willing to lend after two large bank failures last month.
The number of people buying houses went down at the end of last year because of increased borrowing costs. But while new residential construction has slowed over the past year, construction jobs have held up, mostly because of a backlog in construction projects, Swonk said. She said that the decline in construction employment was caused by weak demand for housing and harsh spring weather.
“Manufacturing is one of the most interest-rate sensitive industries, as much as technology and financial services, so it’s not surprising to see the job losses there,” said Sinem Buber, lead economist at ZipRecruiter.
According to the Institute for Supply Management’s data, the manufacturing sector has been contracting for five months in a row. The survey’s index fell to its lowest level since May 2020.
Buber said that it was likely that the consumer demand for clothes and household products had weakened.
“Those goods are a bit more responsive to any changes in the market, and that’s why we’re seeing that industry respond faster than durable goods,” Buber said.
If businesses begin to see a reduction in temporary hires, it’s usually a sign of weakness in the revenue stream, which indicates an easing of the jobs market.