The U.S. labor market cooled along with expectations in March. There were 236,000 Nonfarm Payroll jobs added, in line with the consensus estimate for 239K (range +78K to +325K). There were expectations of a negative flow on from the technology and financial layoffs as evidenced by March ADP employment at +145K vs 216K expected. Job gains at many services businesses are helping offset cuts at large companies in industries such as technology, finance and entertainment. Jobs were strong in the household survey however the establishment survey was pushed up by strong government hiring.
The March US jobs report dropped on Good Friday with most global markets closed. S&P 500 futures were open for a short time after the report and finished up 9.5 points to 4141. February JOLTS were reported as openings falling by more than 600,000 to near two-year lows. Unemployment fell to 3.5% in March.
Key from the March report is that it was still a strong report for this point in the Fed’s tightening cycle. There is now the SIVB collapse causing an additional headache at the April FOMC meeting.
March 2023 US Employment Report
The jobless rate was 3.5% in March the Labor Department reported Friday. The unemployment rate is back at the pandemic rate of 3.5%, which was a 50-year low. (This was bettered in Jan at 3.4%) The job market is still tight, with the national unemployment rate hovering near half-century lows.
Job growth is moving away from sectors that benefited from growth drivers earlier in the pandemic toward the sectors that serve the innate desire to get back to more normal activities and have worker shortages as evidenced by high job vacancies. In nutshell layoffs are being absorbed by the job market in this rotation.
March 2023 US Employment Report and Expectations
Highlights
Employment
- Change in Nonfarm Payrolls Mar: 236K (est 230K, prev 311K)
- Unemployment Rate Mar: 3.5% (est 3.6%, prev 3.6%)
- Labour Force Participation Rate Mar: 62.6% (exp 62.4%; prev 62.5%, 63.4% pre-pandemic)
- Prior two-month net revision -17K with employment gains over reported
The unemployment rate and number of unemployed persons prior to the coronavirus (COVID-19) pandemic was 3.5 percent and 5.7 million, respectively, in February 2020). The number of employed persons in The United States increased to 160,892,000 in March of 2023 from 160,315,000 in February of 2023
- Change In Private Payrolls Mar: +189K (exp 210K; prev 265K)
- Change in Manufacturing Payrolls Mar: -1K (exp 10K; prev -4K)
- Change in Government Payrolls Mar +47K (prevR +60k)
- Household survey Mar +577K versus Prior +177K
- U6 Underemployment Rate Mar: 6.7% (prev 6.6%)
- Birth-death adjustment Mar jobs Prior+176K
- Long-term unemployed Mar 1.1mil vs (prev 1.1m, 1.2m pre-pandemic)
- The long-term unemployed rose to 18.9 percent of all unemployed persons in March
- The employment-population ratio Mar 60.4% vs (prevR 60.2%, 61.2% before pandemic)
Earnings
- Average Hourly Earnings (M/M) Mar: 0.3% (est 0.3%, prev 0.2%)
- Average Hourly Earnings (Y/Y) Mar: 4.2% (est 4.3%, prev 4.6%)
- Average Weekly Hours All Employees Mar: 34,4 (est 34.5; prev 34.5)
- Payrolls benchmark NSA revision for 2022 was in Jan 23
- Payroll benchmark SA 2022 was in Jan 23
Other March Employment Reports
- ISM manufacturing employment 46.9 vs 49.1 prior
- ISM services employment 51.4 vs 54.0
- Philly employment -10.3 vs +5.1 prior
- Empire employment -10.1 vs -6.6 prior
- Initial jobless claims survey week 247K vs 197K expected
The market had expected the March report released Friday to show nonfarm payrolls rose 239k new jobs. March continues the drop from an average of 439K in the first eight months of last year, as higher interest rates and prices started to weigh on the economy. Private payroll company ADP reported that US jobs grew just +145K vs 216K expected in March.
A severe labor shortage had driven up annual wage increases above 5% every month of this year until the last quarter. By contrast, wage gains averaged 3.2% in the 12 months to February 2020. Wage growth rose last month with, average hourly earnings rose by 0.3% in March from a month earlier. They were up 4.2% from a year earlier.
Employers hired across industries. Companies in certain industries that are vulnerable to interest-rate increases, such as technology and real estate, have announced layoffs. Some firms have implemented hiring freezes.
Participation
Labor force participation rate moved up from 62.4% to 62.6% prior; rate for women moved up to highest since pandemic started. Participation is down from 63.4% in February 2020.
Market Reaction
The report itself being good news for the economy is seen as mixed news for bond and stock markets, thinking it will hold any eventual pivot on rates by the Fed with its monetary policy. The report says still higher for longer with respect to the target range for the fed funds rate. However today’s markets have been overridden by the shutdown of SVB Financial and Signature banks and the havoc that has caused.
The March US jobs report dropped on Good Friday with most global markets closed. S&P 500 futures were open for a short time after the report and finished up 9.5 points to 4141.
Any impact from the failure of Silicon Valley Bank and subsequent financial turmoil won’t likely show up in March’s jobs data, which reflects hiring trends earlier in the month. We will watch for this affect next month. Through the beginning of April, both loan demand and credit conditions deteriorated per Dallas Fed Banking Conditions Survey. Both have reversed lower and are near worst since pandemic erupted (note: both series limited and only back to 2017). via @LizAnnSonders·
“The great labor market machine is finally slowing down some, but it’s still got a lot of strength left,” said Robert Frick, corporate economist at Navy Federal Credit Union.
WSJ Fedwatcher Nick Timiraos on the jobs report:
Where the Jobs Were:
Largest gains occurring in:
- Leisure/hospitality (72K), namely food services and drinking places;
- Government (47K);
- Professional and business services (39K);
- Health care (34K).
- Transportation and warehousing (10K)
- Employment showed little change in mining, quarrying, and oil and gas extraction; construction; manufacturing; wholesale trade; information; financial activities; and other services
Largest losses occurring in:
- Retail trade (-15K), namely building material and garden equipment and supplies dealers.
Other Employment Reports
Household Survey Data
Both the unemployment rate, at 3.5 percent, and the number of unemployed persons, at 5.8 million, changed little in March. These measures have shown little net movement since early 2022.
Among the major worker groups, the unemployment rate for Hispanics decreased to 4.6 percent in March, essentially offsetting an increase in the prior month. The unemployment rates for adult men (3.4 percent), adult women (3.1 percent), teenagers (9.8 percent), Whites (3.2 percent), Blacks (5.0 percent), and Asians (2.8 percent) showed little or no change over the month.
Among the unemployed, the number of permanent job losers increased by 172,000 to 1.6 million in March, and the number of reentrants to the labor force declined by 182,000 to 1.7 million. (Reentrants are persons who previously worked but were not in the labor force prior to beginning their job search.)
The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 1.1 million in March. These individuals accounted for 18.9 percent of all unemployed persons. The labor force participation rate, at 62.6 percent, continued to trend up in March. The employment/population ratio edged up over the month to 60.4 percent. These measures remain below their pre-pandemic February 2020 levels (63.3 percent and 61.1 percent, respectively).
The number of persons employed part time for economic reasons was essentially unchanged at 4.1 million in March. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs. The number of persons not in the labor force who currently want a job was little changed at 4.9 million in March and has returned to its February 2020 level. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take a job.
Among those not in the labor force who wanted a job, the number of persons marginally attached to the labor force was little changed at 1.3 million in March. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months but had not looked for work in the 4 weeks preceding the survey. The number of discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, also was little changed over the month at 351,000.
Establishment Survey Data
Total nonfarm payroll employment increased by 236,000 in March, compared with the average monthly gain of 334,000 over the prior 6 months. In March, employment continued to trend up in leisure and hospitality, government, professional and business services, and health care.
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Private Jobs
- Leisure and hospitality added 72,000 jobs in March, lower than the average monthly gain of 95,000 over the prior 6 months. Most of the job growth occurred in food services and drinking places, where employment rose by 50,000 in March. Employment in leisure and hospitality is below its pre-pandemic February 2020 level by 368,000, or 2.2 percent
- Employment in professional and business services continued to trend up in March (+39,000), in line with the average monthly growth over the prior 6 months (+34,000). Within the industry, employment in professional, scientific, and technical services continued its upward trend in March (+26,000).
- Over the month, health care added 34,000 jobs, lower than the average monthly gain of 54,000 over the prior 6 months. In March, job growth occurred in home health care services (+15,000) and hospitals (+11,000). Employment continued to trend up in nursing and residential care facilities (+8,000).
- Employment in social assistance continued to trend up in March (+17,000), in line with the average monthly growth over the prior 6 months (+22,000).
- In March, employment in transportation and warehousing changed little (+10,000). Couriers and messengers (+7,000) and air transportation (+6,000) added jobs, while warehousing and storage lost jobs (-12,000). Employment in transportation and warehousing has shown little net change in recent months.
- Employment in retail trade changed little in March (-15,000). Job losses in building material and garden equipment and supplies dealers (-9,000) and in furniture, home furnishings, electronics, and appliance retailers (-9,000) were partially offset by a job gain in department stores (+15,000). Retail trade employment is little changed on net over the year.
- Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; construction; manufacturing; wholesale trade; information; financial activities; and other services.
Government Jobs
Government employment increased by 47,000 in March, the same as the average monthly gain over the prior 6 months. Overall, employment in government is below its February 2020 level by 314,000, or 1.4 percent
Manufacturing Jobs
Manufacturing payrolls in the United States decreased by 1,000 in March 2023, marking the second consecutive month of decline, and well below market forecasts of a 5,000 increase
Earnings
In March, average hourly earnings for all employees on private nonfarm payrolls rose by 9 cents, or 0.3 percent, to $33.18. Over the past 12 months, average hourly earnings have increased by 4.2 percent. In March, average hourly earnings of private-sector production and nonsupervisory employees rose by 9 cents, or 0.3 percent, to $28.50.
Wages Monthly
Wages Yearly
The average workweek for all employees on private nonfarm payrolls edged down by 0.1 hour to 34.4 hours in March. In manufacturing, the average workweek was unchanged at 40.3 hours, and overtime remained at 3.0 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.9 hours
Hours
The change in total nonfarm payroll employment for January was revised down by 32,000, from +504,000 to +472,000, and the change for February was revised up by 15,000, from +311,000 to +326,000. With these revisions, employment in January and February combined is 17,000 lower than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.)
The Employment Situation for April is scheduled to be released on Friday, May 5, 2023, at 8:30 a.m. (ET).
Source: AFP, Challenger, DOL, TradersCommunity Data, BLS
From The TradersCommunity News Desk