The jobs report is on Friday and what to expect is up in the air

The Labor Market’s First Three Month: Job Cuts Revisited in the Light of the BLS-Matching Data Release

There are signs that the Federal Reserve’s yearlong efforts to cool inflation by suppressing demand are starting to wear on that once high-octane ride.

There still remains uncertainty about the extent to which those and other layoffs may ripple through the broader labor market. And that uncertainty has only grown in recent weeks as a result of the turmoil in the banking industry.

Julia Pollak, chief economist at online said, “I think the image that sums up where we are in the labor market is the image that the Chief Economist at Bloomberg sent out, suggesting that there is more talk about job cuts than about shortages in labor.” After the years of labor shortage, everyone was talking about how they were struggling to find workers.

The Bureau of Labor Statistics will release the jobs report on Friday, and just how much of a shift there is will be known.

According to Refinitiv, monthly job gains are expected to slow, with consensus estimates 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.

On Tuesday, the latest read on labor turnover showed that job openings in the United States dropped below 10 million for the first time in more than a year and half. The BLS found that there were 9.93 million jobs available in February.

Online job postings have reduced in recent weeks. There have been a decrease in postings from a month prior according to the Indeed Hiring Lab.

The share of postings advertising retirement plans, paid time off and health insurance has gone down, according to Indeed hiring lab’s head of economic research.

“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.

The March job cuts bring the first three months to 270,416 and make them the seventh highest first quarter job cut announcement in the past 35 years.

The total of weekly claims was 228,000 up from the upwardlyrevised total of the week before, but below economists’ expectations. (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).

What do we really need to learn about banking, financial and technology if we are in a recession? An economist’s perspective on the March job loss risk index

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.

“It doesn’t necessarily require that other banks fail in order for an impact to be seen,” Daniel Zhao, lead economist at Glassdoor, told CNN. There might be repercussions from the banking troubles that kicked off in March if banks pull back on lending to businesses, preventing businesses from growing their workforces.

If the unemployment rate jumps by 0.2 percentage points and the headline jobs number falls between zero and 200,000, this could be red flags.

“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. It does start to add up if we see another one.

Economists, by and large, are still factoring in a recession later this year. According to new research from the Conference Board, the recession will have an effect on some industries more than others.

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.

repair, personal and other services, manufacturing, wholesale trade, real estate are some of the industries that are classified as high risk. Industries with a “very low” or “low” risk include private educational services, health care, public sector employment, retail, food services, and arts and entertainment.

Employment in these industries rose as telework and e-commerce grew. However, that environment has shifted as people have returned to work and shifted spending to service-oriented industries. Additionally, high interest rates have made borrowing more costly and weakened industries such as housing.

Source: https://www.cnn.com/2023/04/06/economy/march-jobs-report-preview/index.html

The Labor Market in the U.S. During the March Job-Sensitization Precession and the Birth of a Lower-Dimensional Population

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.

The labor market is likely to show continued weakness in the March report, but it won’t stop the Fed from hiking rates in May, according to Nancy Vanden Houten.

Oxford Economics expects quarter-point rate hikes at the Fed’s May and June meetings, noting the latter projected hike is more up in the air 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.

Despite other areas of the economy slowing under the weight of interest rate hikes, the US labor market has kept trucking along and is showing signs of cooling.

“From the Fed’s point of view, I think a softer labor market is welcome, if it’s a controlled slowdown,” House said. They don’t want to see the labor market suddenly start to freeze up and start to lose jobs. They would like to see hiring slowed down so that more people return to the workforce and reduces inflationary pressure on the economy.

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.

Over the past two and half years, there have been a lot of rumors about why workers were missing with recent research showing that deaths associated with Covid and reduced immigration are the main culprits.

The labor force participation rate for workers in their 50’s and 60’s hit 83.2% in February, compared to 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. The February 2020 rate was 63.3%.

An increase in average hourly earnings was seen from the month before to the month before. On an annual basis, earnings increases moderated to 4.2% 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 has not been this low in 45 years.

The labor market for goods production is beginning to break down. The construction industry lost 9,000 jobs in March, the first decline in construction employment in more than a year and the largest job loss in the sector since May 2021 -— though still a drop of just under 1.1%.

The Implications of Recent Interest Rate Increases for the Construction and Manufacturing Sectors, as the Fed Trimmed Inflationary Rates Reciprocalized

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.

Hiring is predicted to slow further as banks become more cautious after two big bank failures last month.

Demand for housing tanked at the end of last year when aggressive rate hikes from the Federal Reserve pushed up borrowing costs for home buyers. While new residential construction has slowed over the last year, jobs in the construction industry have held up, most of it due to a delay in construction projects. She said a decline in construction employment in March is attributed to weak demand for housing and harsh spring weather.

The manufacturing sector is one of the more interest-rate sensitive industries, and it is not surprising to see job losses there.

The manufacturing sector contracted for the fifth month in a row in March according to data released by the Institute for Supply Management. The survey’s index fell to its lowest level since May 2020.

The nondurable goods industry also saw a pullback in hiring, which was likely due to weaker consumer demand for clothes and household products, Buber added.

Buber said that the industry responds quicker than durable goods when changes in the market occur.

Bovino said that a reduction in temporary hires is usually a sign that businesses are seeing some softness in the revenue stream.