– by New Deal democrat

In the past few months, my focus has been on whether jobs gains are most consistent with a “soft landing,” i.e., no further deterioration, or whether deceleration is ongoing; and more specifically: 

• Whether there is further deceleration in jobs gains compared with the last 6 month average, vs. a “soft landing” stabilization – and even whether the recent increase in monthly jobs numbers signifies a re-strengthening.
• Based on the leading relationship of initial and continuing jobless claims, whether the unemployment rate is neutral or decreasing; or whether there is further weakness.
• Based on the leading relationship of the quits rate to average hourly earnings, whether YoY wage growth would continue to decline slightly. It did continue to decline to a new post-pandemic low – but still at 4%.

All three of these metrics came in negative, in the sense of the lowest gain in jobs since last October, and the 4th lowest in over 3 years. The unemployment rate increased. And average hourly wage growth decreased to its lowest rate in almost 3 years as well.

Here’s my in depth synopsis.

HEADLINES:

• 175,000 jobs added. Private sector jobs increased 167,000. Government jobs increased by 8,000. 
•  February was revised downward by -34,000, while March was revised upward by 12,000, for a net decline of -22,000. This continues the pattern from nearly every month in the 16 months of a steady drumbeat of downward net revisions.
• The alternate, and more volatile measure in the household report, showed a paltry 25,000 increase. On a YoY basis, in this series only 529,000 jobs, or 0.3%, have been gained. This is the lowest YoY increase since the pandemic lockdowns.
• The U3 unemployment rate rose 0.1% to 3.9%, tying February’s 2 year high.
• The U6 underemployment rate also rose 0.1% to 7.4%, 0.9% above its low of December 2022.
• Further out on the spectrum, those who are not in the labor force but want a job now rose 194,000 to 5.637 million, vs. its post-pandemic low of 4.925 million set just over 12 months ago.

Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn. These were very mixed:

• The average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, declined -0.1 hours to 40.7 hours, and is still down -0.8 hours from its February 2022 peak of 41.5 hours.

• Manufacturing jobs rose 8,000.
• Within that sector, motor vehicle manufacturing jobs declined -2,100. 
• Truck driving declilned -300.
• Construction jobs increased 9,000.
• Residential construction jobs, which are even more leading, rose by 2,800 to another new post-pandemic high.
• Goods producing jobs as a whole rose 14,000 to another new expansion high. These should decline before any recession occurs.
• Temporary jobs, which have generally been declining late 2022, fell by another -16,400, and are down almost -500,000 since their peak in March 2022. This appears to be not just cyclical, but a secular change in trend.
• the number of people unemployed for 5 weeks or fewer rose 73,000 to 2,262,000.

Wages of non-managerial workers

• Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.06, or +0.2%, to $29.83, for a YoY gain of +4.0%. With revisions, the YoY growth in these have been sliding almost relentlessly since 2 years ago. This is the lowest YoY gain since June 2021, vs. its post-pandemic peak of 7.0% YoY in March 2022.

Aggregate hours and wages: 

• The index of aggregate hours worked for non-managerial workers declined -0.2% and is up 1.4% YoY.
•  The index of aggregate payrolls for non-managerial workers rose 0.1%, and is up 5.5% YoY, the second lowest YoY advance since the end of the pandemic lockdowns. This is 2.0% above the most recent YoY inflation rate, and despite the decline in growth remains powerful evidence that average working families have continue to see gains in “real” spending money. On the other hand, most likely once April’s CPI is reported, there will be a month over month decrease.

Other significant data:

• Professional and business employment declined -4,000. These tend to be well-paying jobs. This series had generally been declining since last May, but in the previous 4 months had resumed their increase; but are still only higher by 0.4% from one year ago.
• The employment population ratio declined -0.1% to 60.2%, vs. 61.1% in February 2020.
• The Labor Force Participation Rate remained steady at 62.7%, vs. 63.4% in February 2020.

SUMMARY

After last month’s extremely strong report, it was perhaps inevitable that this month’s report would be relatively disappointing. And disappoint it did, as the Establishment survey was very mixed, and the Household report was *very* weak.

There were some good points, as job growth continued in manufacturing, construction, and goods production in general. I would expect all of these to turn down before.- in the case of the first two, well before – any recession were to hit. And the reason for the relatively poor headline jobs number was the paltry growth in government jobs. Growth in the private sector was actually average for the past 18 months.

But these were overwhelmed by most of the bad points. In the Establishment Survey, auto, trucking, and temporary help jobs declined. Revisions were once again net negative. The manufacturing workweek declined slightly. Worse, the aggregate number of hours worked declined. And aggregate payrolls rose a paltry 0.1%. In the Household Survey, only 64,000 jobs were gained, while unemployment increased by 25,000, driving an increase in the unemployment and underemployment rates. The YoY gain of 0.3% in jobs in this survey historically has been recessionary. 

On net, this report mainly balances last month’s great report. It doesn’t set off any alarm bells, but it’s the first significant ding in the “soft landing” hypothesis in many months.

March Jobs Report: almost uniformly positive, making a “soft landing” the default 2024 scenario, Angry Bear by New Deal democrat

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