We’re at a tipping point: What to expect from the jobs report

City says 7,000 summer jobs are available for Boston youth ages 14 to 18

Minneapolis (CNN) The US job market has continued to truck in properly even as other areas of the economy have slowed.

But that once high-octane trip is showing some signs of wear and tear amid the Federal Reserve’s year-long effort to quell inflation by suppressing demand.

Job cuts are mounting, hiring activity is losing momentum, and uncertainty is intensifying about how the recent turmoil in the banking sector could spill over into the economy.

“I think the picture, for me, that sums up our place in the labor market is photo tweet “Signs of job cuts are now higher than mentions of labor shortages in earnings calls,” said Julia Pollack, chief economist at online job site ZipRecruiter, by Bloomberg’s chief economist. “It was a huge reversal after 2024 and 2024 were largely years of labor shortages and everyone was talking about how they were struggling to find workers.”

“We are at a turning point now,” she added.

How much of a shift there can become more apparent at 8:30 AM ET on Friday when the Bureau of Labor Statistics drops its highly anticipated jobs report for March.

Economists expect monthly job gains to slow, with the consensus estimate falling at 239,000, according to Refinitiv. This would be a significant decrease from the 311,000 jobs gained in February and a significant drop from the 504,000 net gain in January.

Refinitiv estimates the monthly unemployment rate to be steady at 3.6%. average weekly working hours unchanged at 34.5; Average earnings rose only slightly (0.1 percentage point) to 0.3% for the month, which would lower average hourly earnings growth to 4.3% from 4.6%.

Employers back off

If the labor market data released so far this week is anything to go by, the March jobs report should show some notable coolness:

On Tuesday, the latest labor turnover reading showed that job openings in the United States fell below 10 million for the first time in more than a year and a half. The number of available jobs fell to 9.93 million in February, according to the BLS Job Opportunity and Employment Turnover Survey.

The recent decline in job opportunities indicates that the labor market is showing some stagnation: the number of jobs available to each job seeker is now less than 1.7. In January, this ratio was about 1.9.

Online job postings are showing a similar, if not more uptick, in recent weeks. Data from the Reality Hiring Lab shows that as of March 24, hirings—both general and new—were down from the previous month.

In addition, the share of advertised benefits such as health insurance, paid vacation and retirement plans has dwindled, Nick Pinker, head of economic research at Indeed Hiring Lab, told CNN.

“This suggests that there may be some fading in the competition for appointments at the moment,” he said.

On Wednesday, the latest private sector payrolls report from payroll processor ADP came in at 145,000 for March, below expectations.

“Employers are reversing a year of strong hiring; wage growth, after three months of stability, is reversing,” 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, a 15% increase from February and more than triple what was reported in the previous year (when the labor market recovery was still underway). By leaps and bounds).

Staffing plans fell to 9,044, the lowest March total since 2015, according to the Challenger report.

With the March job cuts, that brings the total for the first three months to 270,416, making it the seventh-highest announcement of first-quarter job cuts in the past 35 years.

Nearly half of the layoffs have come from the technology sector, where many companies are falling sharply after over-hiring during the pandemic. Financial firms announced the second-largest job cuts year-to-date with 30,635 jobs, according to the Challenger report.

Also on Thursday, the latest weekly jobless claims data showed that continuing claims, filed by people who have been receiving unemployment benefits for more than a week, continued its upward march to 1.823 million for the week ending March 25, marking the highest level since then. December 2024. Economists had expected 1.699 million, according to Refinitiv.

Weekly claims totaled 228,000, down from the upwardly revised total in the previous week but above economists’ forecasts of 200,000. (Beginning with Thursday’s report, the Labor Department has made a series of significant revisions to recent years’ data to better explain the dynamics of the pandemic era.)

Possible red flags

The overall strength of the labor market – and continued demand in part-time industries such as entertainment and hospitality as well as healthcare – more than offsets the losses seen in technology and finance.

There remains uncertainty about the extent to which these and other layoffs can spread through the broader labor market. This uncertainty has only increased in recent weeks as a result of the turmoil in the banking industry.

“It doesn’t necessarily take other banks to fail in order to see the impact,” Daniel Gao, chief economist at Glassdoor, told CNN. “But if the effect is that banks hold back on lending to companies, and that prevents companies from continuing to expand their headcount, then we may see the impact on the labor market through those subtle cascading effects from the banking problems that started in March.”

It would be too early to see any of those ripple effects in the March jobs report, Zhao said, adding that he still expects monthly job gains in the 200,000 to 300,000 range. However, Zhao noted that he will closely monitor some of the metrics in the jobs report. That could show whether the US labor market is slowing from its post-pandemic highs or starting to slip into deflationary territory.

Some potential warning signs could include: if the number of key jobs falls between zero and 200,000, and if the unemployment rate jumps by 0.2 percentage point or more.

“I think the concern then is that it’s starting to look like the beginning of a recession, because we’ve already seen a 0.2 percentage point increase. [in the jobless rate] From January to February. “So if we see another one, that starts to build up.”

In addition, the decline in average weekly hours worked could indicate that supply has sunk enough that companies have had to cut hours, he added.

Industries are at risk

Economists, in general, are still considering a recession later this year. And although it is likely to be “short and shallow,” the recession will affect some industries more than others, according to new research from the Conference Board.

This week the Business Membership and Research Group launched the Job Loss Risk Index, which estimates which industries could experience the largest employment losses during a recession.

According to the organization’s findings, the industries most at risk include information services, transportation and warehousing, and construction.

Employment in these industries swelled during the pandemic as remote work and e-commerce boomed. However, that environment has shifted as people go back to work and shift spending to service-oriented industries. In addition, high interest rates have made borrowing more expensive and weakened industries such as housing.

The next level of industries classified as “high” risk include: repair, personal services and others; manufacturing; wholesale trade; and real estate. Industries with “very low” or “low” risk include private educational services, health care, public sector employment, retail, food services, and arts and entertainment.

What does this mean for future price hikes

Friday’s jobs report will be the last monthly snapshot of employment before the Fed’s next policy-making meeting on May 2-3, when April data will be released on May 5.

And although the March report will likely show a continued slowdown in the labor market – particularly wage gains and job growth – the Fed will likely not be dissuaded from agreeing to a quarter-point rate hike in a row in May, the leading US economist in Oxford Economics Nancy Vanden Houten wrote in a note on Tuesday.

“Moderation will not be enough to convince the Fed that labor market conditions are softening enough to return inflation to its 2% target,” she wrote.

Oxford Economics forecasts quarter-point interest rate increases at the Fed’s meetings in May and June, noting that the expected recent rise is more up in the air due to banking sector pressures.

The Bureau of Labor Statistics is scheduled to release the March jobs report at 8:30 a.m. ET. US markets are closed in observance of Good Friday.