Achi news desk-
All eyes will be on the US unemployment numbers on Friday to see how many jobs were added in March and whether the unemployment rate remains in its historically low range or if it’s time for the alarm bells to start. sing
US job growth has remained steady in the months since the early days of the COVID-19 pandemic, when businesses came to an abrupt halt.
“Following the pandemic as things started to pick back up, there was a real struggle to find people to work and companies had to raise how much you paid to get people,” said Matt Colyar, an economist at Moody’s Analytics.
There are a number of factors behind that, including restrictions on the number of foreigners entering the country during the COVID-19 pandemic and baby boomers leaving the workforce in fear of the pandemic, creating almost to a shortage of some two million workers aged 55. and older.
As business closed as a result of the pandemic, nearly 22 million jobs were lost. Much of the hiring since then has involved backfilling those roles, said Dan North, senior economist at Allianz Trade, adding: “It’s not like those jobs went away.”
Since the start of the pandemic, the US economy has lost 21,888,000 jobs and added 27,387,000, according to Allianz Trade data. “You could argue that the economy has only created 5,499,000 new jobs,” North said.
But jobs are being created, though. Although employment fell by 243,000 jobs in December 2020, following seven consecutive months of gains, the labor market has steadily added jobs every month since, taking the US economy on a 38-month streak of monthly job earnings.
If payroll employment is shown to have risen in March in Friday’s monthly jobs report, which is released at 8:30am local (12:30 GMT), then it will be a 39-month streak.
Driving jobs in the health care sector and the state
While jobs in the leisure and hospitality sectors are still catching up to pre-pandemic levels, two sectors driving job growth are health care and state and local government, experts say.
“Healthcare in the US has always been undersupplied in terms of labor so strong growth in that sector is a good thing,” said Bernard Yaros, chief US economist at Oxford Economics. “Our hospitals and health clinics should be fully staffed, especially given an aging population.”
Hiring for government jobs is still focused on filling jobs lost during the pandemic, Yaros said. That sector was a late starter due to the government’s inability to match private sector wages in order to attract talent, he said. But now that hiring is slowing in the private sector, jobs in the state sector have seen solid growth, he added.
Much of the hiring is also being driven by a rebound in immigration since 2023 — both legal and undocumented — that has allowed the economy to continue adding more than 200,000 jobs a month, Yaros said.
“When there is an increase in labor supply through immigration, it allows for strong growth. But that doesn’t lead to inflation because you have more people looking for work so employers don’t have to raise wages [as much] to attract workers”, said Yaros.
However, hiring in most other sectors remains volatile and mixed, he added.
‘Starting to see some disturbance’
“Beneath the glossy headlines, we’re starting to see some disruption,” North said.
On Tuesday, the Job Openings and Labor Turnover Survey, or JOLTS report, from the US Department of Labor showed that there were 1.36 job vacancies for every unemployed person in February, down from 1.43 in January. The decrease shows an increase in unemployment.
According to the data, layoffs reached 1.7 million in February, up from 1.6 million in January. Job openings are down 11 percent year-on-year and the number of workers resigning – the number of workers who are resigning their jobs, likely for better opportunities, North said – has returned to pre- -COVID, indicating that wage increases will not be as rapid. fast or high as they have been.
Unemployment numbers, while still at historic levels, are slowly starting to increase, hitting 3.9 percent last month, up from 3.7 percent for each of the previous three months.
Although the unemployment rate has been below 4 percent for just over two consecutive years – the longest such period since the late 1960s – the mood is beginning to change. In a March consumer confidence survey by The Conference Board, consumers said it was harder to get jobs and they expected their income to fall over the next six months.
The question now is if, or when, unemployment numbers will break through 4 percent.
“If it goes up to 4.1 percent next month, everyone will start talking about the Sahm rule,” North said, referring to former Federal Reserve economist Claudia Sahm, who devised a measure that examines how fast it is the unemployment rate rises to determine if it is a sign of recession.
Although most economists agree that the chances of the US economy slipping into recession have receded, an increase in the unemployment rate will slow economic growth.
All of this feeds into decisions the Fed will have to make about whether to cut interest rates, and how quickly. The benchmark overnight interest rate is in the 5.25 percent to 5.5 percent range, where it has been since July to curb a 40-year high inflation spike. Although inflation has fallen since then and was hovering around 3.2 percent by the end of February, the most recent data available, that is still above the Fed’s target of 2 percent.
In such a situation, a robust jobs market – and healthy spending power alongside – will mean the Fed is looking for signs of an increase in inflation, delaying interest rate cuts.
But a slowdown in hiring – and an increase in unemployment, ultimately – could bring the possibility of interest rate cuts. The data on Friday will offer some clues.
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