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Minneapolis (CNN) The U.S. labor market continues to truck even as other sectors of the economy slow.
But in a year-long effort by the Federal Reserve to curb demand and cool inflation, the once-high-octane vehicle is showing signs of wear and tear.
Job cuts are on the rise, hiring is running out of steam and there is growing uncertainty about how the recent turmoil in the banking sector will play out in the economy.
“For me, the image that best sums up where we are in the labor market is Tweeted image Julia Pollak, chief economist at online job site ZipRecruiter, said: After years of being understaffed, everyone said they were having trouble finding workers. “
“We are at a tipping point right now,” she added.
Just how much change could be further revealed at 8:30 a.m. ET on Friday, when the Bureau of Labor Statistics drops its long-awaited March jobs report.
According to Refinitiv, economists expect monthly job growth to slow, with consensus estimates reaching the 239,000 level. That’s a notable drop from his 311,000 jobs added in February, and a significant drop from January’s huge net gain of 504,000.
Refinitiv estimates the monthly unemployment rate to be stable at 3.6%. The average weekly working hours remained unchanged at 34.5 hours. Average revenue rose slightly (0.1 percentage points) to 0.3% over the month. This reduces average annual hourly revenue growth from 4.6% to 4.3%.
‘Employers are leaving’
If the labor market data released so far this week serve as a proxy, the March jobs report should show a notable cooling.
On Tuesday, the latest reading on workforce turnover showed that US job openings fell below 10 million for the first time in over a year and a half. According to the BLS Job Openings and Labor Turnover Survey, job openings for February fell to 9.93 million.
The recent decline in job openings indicates a loose labor market. There are currently less than 1.7 job openings per job seeker. In January, that ratio was nearly 1.9.
Online job postings have shown similar, if not higher setbacks in recent weeks. Data from Indeed Hiring Lab shows that as of March 24, the number of posts (both overall and new) is down from his one month prior.
Additionally, the share of posts promoting benefits such as health insurance, paid vacation and retirement plans has declined, Nick Bunker, head of economic research at Indeed Hiring Lab, told CNN.
“This suggests that the hiring race may be waning right now,” he said.
On Wednesday, the latest private sector employment report from payroll processor ADP was 145,000 in March, lower than expected.
“Employers are pulling back from a year of strong hiring, and wage growth is tapering off after three months of stagnation,” ADP chief economist Nella Richardson said in a statement.
And on Thursday morning, Challenger Gray & Christmas reported that US employers announced 89,703 job cuts in March. This is his 15% increase from February and more than triple what he reported a year ago (when the labor market recovery was still in full swing).
Employment plans fell to 9,044, the lowest March total since 2015, according to the Challenger Report.
March’s headcount reductions brought the company’s first three-month total to 270,416, the seventh-highest number of first-quarter job cuts announced in the last 35 years.
Nearly half of the layoffs are from the technology sector, where many companies have significantly scaled back after overhiring during the pandemic. The financial firm announced his second-highest job cuts year-to-date with 30,635 jobs, according to Challenger Report.
Also on Thursday, the latest weekly unemployment claims data showed that 1.823 million continuation claims were filed by people who had been receiving unemployment benefits for more than a week in the week ended March 25. It continued to rise to the highest level since then. December 2021. Economists had expected 1.699 million, according to Refinitiv.
Weekly claims totaled 228,000, down from the previous week’s revised upward total, but above economists’ expectations of 200,000. (Starting with Thursday’s report, the Labor Department has made a series of significant revisions to recent data to better account for pandemic-era dynamics).
potential red flags
Overall strength in the job market and continued demand in underemployed industries such as leisure, hospitality and health care more than offset the losses seen in technology and finance.
Uncertainty remains about the potential for these and other layoffs to spill over into the broader labor market. And that uncertainty has only increased in recent weeks as a result of turmoil in the banking industry.
Glassdoor chief economist Daniel Zhao told CNN, “You don’t necessarily have to see other banks go bust to see the impact.” “However, if the impact is that banks refrain from lending to companies and companies continue to expand their workforces, we can see the impact on the labor market through subtle spillovers from the bank problems that began in March. There is a possibility that
Zhao said it was too early to see such a ripple effect in the March employment report, adding that he expected monthly employment growth in the range of 200,000 to 300,000. But Zhao said he’s keeping a close eye on certain indicators in the U.S. jobs report that could indicate whether the U.S. labor market is slowing from its post-pandemic highs or starting to slip into recession territory. Stated.
Possible red flags include: If the number of major jobs is between 0 and 200,000 and if the unemployment rate increases by more than 0.2 percentage points.
“I think the concern then is that we’ve already seen a 0.2 point gain, so it’s starting to look like the beginning of a recession. [in the jobless rate] From January to February,” he said.
Furthermore, the decline in average workweeks could indicate that supply has fallen to the point that companies have had to cut hours, he added.
industry at risk
Economists are generally still thinking of a recession later this year. And while the recession is most likely to be “short and shallow,” it may affect some industries more than others, according to new The Conference Board research.
Business members and research groups this week released the Unemployment Risk Index, which estimates which industries are likely to suffer the most job 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 surged during the pandemic as telework and e-commerce boomed. But that environment has changed as people have returned to work and shifted their spending to service-oriented industries. In addition, high interest rates have led to high borrowing costs, weakening industries such as housing.
The next tier of industries classified as ‘high’ risk includes repairs, personal and other services. manufacturing; wholesale trade; and real estate. Industries with ‘very low’ or ‘low’ risk include private education services, health care, public sector employment, retail, food service, arts and entertainment.
What this means for future rate hikes
April data is out on May 5, making Friday’s jobs report the last monthly employment snapshot before the Fed’s next policy meeting on May 2-3. .
The March report likely points to a continued slowdown in the labor market, particularly with higher wages and more jobs, but the Fed’s third straight quarter-point decline in May It probably won’t dissuade them from approving a rate hike, Oxford Economics’ head of US economists Nancy Vanden Houten wrote in a note on Tuesday.
“Easing alone will not be enough to convince the Fed that labor market conditions will ease and inflation will return to its 2% target,” she wrote.
Oxford Economics expects a 1/4 percentage point rate hike at the Fed’s May and June meetings, with the latter’s expected rate hikes more uncertain given stress in the banking sector, Oxford Economics said. .
The Bureau of Labor Statistics is scheduled to release its March employment report at 8:30 a.m. ET. US markets are closed to mark Good Friday.
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