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March jobs report: almost uniformly positive, making a “soft landing” the default 2024 scenario

Summary:
In sum, this month’s report was very much consistent with a “soft landing” scenario, which must be regarded as the default outcome at this point. Read-on for the details . . . – by New Deal democrat The Bonddad Blog 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. Whether the unemployment rate is neutral or decreasing; or whether there is further weakness. The recent excellent reports in initial claims suggested this rate would decline. After a contra-trend jump

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In sum, this month’s report was very much consistent with a “soft landing” scenario, which must be regarded as the default outcome at this point. Read-on for the details . . .

– by New Deal democrat

The Bonddad Blog

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.
  • Whether the unemployment rate is neutral or decreasing; or whether there is further weakness. The recent excellent reports in initial claims suggested this rate would decline. After a contra-trend jump last month, this month the unemployment rate did decline.
  • 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 above 4%.

In other words, all three focus points were as expected or better. Here’s my in depth synopsis.

HEADLINES:

  • 303,000 jobs added. Private sector jobs increased 232,000. Government jobs increased by 71,000. 
  •  January was revised upward, while February was revised downward, by 27,000 and -5,000 respectively, for a net of 22,000. The pattern from nearly every month in the past year, has been a steady drumbeat of downward revisions, so this mixed result is a slight positive.
  • The alternate, and more volatile measure in the household report, showed a 498,000 increase. Still, on a YoY basis, in this series only 642,000 jobs, or 0.4%, have been gained. This is tied with last month for the lowest since the pandemic lockdowns.
  • The U3 unemployment rate declined -0.1% to 3.8%, down from last month’s 2 year high.
  • The U6 underemployment rate was unchanged at 7.3%, 0.8% above its low of December 2022.
  • Further out on the spectrum, those who are not in the labor force but want a job now declined -229,000 to 5.443 million, vs. its post-pandemic low of 4.925 million set 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 almost all either positive or neutral:

  • the average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, increased 0.1 hours to 40.7 hours, but is still down -0.8 hours from its February 2022 peak of 41.5 hours.
  • Manufacturing jobs were unchanged.
  • Within that sector, motor vehicle manufacturing jobs rose by 900. 
  • Construction jobs increased by a strong 39,000.
  • Truck driving increased 5,100.
  • Residential construction jobs, which are even more leading, rose by 5,500 to a new post-pandemic high.
  • Goods jobs as a whole rose 42,000 to another new expansion high. These should decline before any recession occurs.
  • Temporary jobs, which have generally been declining late 2022, fell by another 1,300, and are down about -420,000 since their peak in March 2022.
  • the number of people unemployed for 5 weeks or fewer declined -137,000 to 2,189,000.

Wages of non-managerial workers

  • Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.07, or +0.2%, to $29.79, a YoY gain of +4.2%. 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 increased 0.5%. This metric is now up 1.7% YoY.
  •  the index of aggregate payrolls for non-managerial workers rose 0.7%, and is now up a very strong 6.1% YoY. This is 2.9% above the most recent YoY inflation rate. This is powerful evidence that average working families continue to see gains in “real” spending money.

Other significant data:

  • Leisure and hospitality jobs, which were the most hard-hit during the pandemic, rose another 49,000. Both leisure and hospitality and its sub sector of food and drink establishment jobs, which gained 28,300 this month, have now completely recovered from their steep pandemic downturn. As a result, I will henceforward discontinue this comparison.
  • Professional and business employment increased another meager 7,000. These tend to be well-paying jobs. This series had generally been declining since last May, but in the last 4 months has resumed its increase.
  • The employment population ratio rose 0.2% to 60.3%, vs. 61.1% in February 2020.
  • The Labor Force Participation Rate also rose 0.2% to 62.7%, vs. 63.4% in February 2020.

SUMMARY

This month’s report hit on nearly all cylinders, with both the Household and Establishment Surveys participating. About the only negative was the continued poor YoY performance in the Household Survey, which number is close to recessionary (but it’s the only one), as well as the punk professional and service sector gains, and the continued slide in temporary help services.

By contrast, almost all of the leading metrics in the survey were positive, or in one case neutral. Aggregate payrolls also increased sharply again, and both the E/P ratio and the LFPR participated in the advances. Manufacturing at least held steady, and construction continues its surprising strong gains in both the residential and nonresidential sub-sectors. The unemployment rate declined as anticipated by the recent jobless claims reports. The three month average of job gains was the highest in the past 12 months, firmly halting the recent decelerating trend. Even average hourly wages for nonsupervisory personnel, which continued to decelerate YoY, remain high nominally, and probably were close to unchanged for the month.

In sum, this month’s report was very much consistent with a “soft landing” scenario, which must be regarded as the default outcome at this point.

The Bonddad Blog

February jobs report: Household Survey is downright recessionary and the Establishment Survey is decidedly mixed – Angry Bear by New Deal democrat

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