A Job Slowdown Could Be Here. What to Watch in Today’s Unemployment Rate Calculation.
Apr 07, 2023
Rising interest rates, continuing inflation, and mounting recessionary worries impacted corporate demand for personnel in March.
A downturn would represent a return to normal levels of growth in the United States labor market, which has been very tight for more than a year. Nevertheless, it may also highlight that job creation remains extraordinarily strong, even as other sectors of the economy show indications of decline.
According to FactSet, economists anticipate the US economy to add 240,000 jobs in March, a decrease from the 311,000 jobs gained in February and closely matching the pace established in December. Experts also predict that the unemployment rate calculation will remain at 3.6%.
The unemployment rate calculation held steady in March if economist projections are right.
Since the early-March failures of Silicon Valley Bank and Signature Bank, investors and analysts have been anticipating evidence that the economy has begun to worsen. While the March employment report will be scrutinized for hints as to where the labor market is headed, it is unlikely to demonstrate what influence the banking turbulence has had on employees, given that the full consequences are reverberating through the economy.
Economists predict that the March data will indicate ongoing strength in the labor market, where job growth has averaged 408,000 per month this year. In January, the US economy added more than 500,000 jobs.
“Broadly, it’s going to look like a pretty healthy number across the board, because there’s still very little evidence that demand for labor has really increased here recently,” Thomas Simons, an economist with Jefferies, says of the March report.
A March unemployment rate calculation report that matches economists’ expectations would be great news for the Federal Reserve. It has stated that it wants to see the labor market stall slightly to help policymakers battle inflation. Because of the increased demand for personnel, salaries have remained high, driving up service costs.
Yet, even a small slowdown in line with projections suggests the Fed will need to do more to cool the job market. Fed Chairman Jerome Powell has stated that the economy needs to produce just around 100,000 jobs per month to keep up with population growth, which is less than half of the March prediction.
The March data may provide a mixed picture of pay growth. Analysts anticipate a 0.3% increase in average hourly wages in March, up from 0.2% in February. Nevertheless, they expect salary growth to decelerate to 4.3% from 4.6% the previous month. It would be a substantially stronger growth rate than the 3.5% rate that many economists feel is consistent with the Fed’s 2% inflation objective.
But, recent warning signals have prompted several economists to admit that the risk to their prediction is tilted to the negative, implying that employment growth is more likely to fall short of expectations than to exceed them.
Wells Fargo, for example, has reduced its projection twice this week, from 240,000 to 190,000. According to Jay Bryson, the firm’s chief economist, the modifications reflect the firm’s cooler-than-expected ISM data and updated unemployment-claims statistics.
Yet, there are reasons to believe that the job market will be better than expected: In each of the last 11 months, job growth has exceeded economists’ consensus predictions.