Since the robust growth of the economy began to peter out in late 2018, economists, business owners and investors alike have looked to see if the jobs market would begin to slow the pace of its mega-growth trends as well. The weak February payrolls gains reported earlier this month are seeing at least some supporting data in weekly jobless claims and other metrics. 24/7 Wall St. has looked through all the recent jobs reports and related data points, most of which are continuing to show at least some cooling-off trends in the jobs market.
In the week ending March 16, the U.S. Department of Labor reported that seasonally adjusted initial claims fell by 9,000 down to 221,000. The previous week’s level was revised up by 1,000 from 229,000 to 230,000 and the consensus estimate from Dow Jones was 225,000.
Where things are looking less strong is in the four-week moving average. This smooths out the weekly gyrations and was reported as being up by 1,000 to 225,000. That average is up close to 20,000 from last September. The advance number for seasonally adjusted insured unemployment, or the continuing claims being measured for repeated claims, was down by 27,000 to 1,750,000. That figure comes with a one-week lag, and the previous week’s level was revised up 1,000 from 1,776,000 to 1,777,000.
It may seem a tad suspect to point to lower jobless claims in the same sentence as talking about a “peak jobs” scenario, but it’s expanding the basic report for a trend and looking at other data that matters here. There has been some added tempering of the jobs market in recent reports.
February’s payroll growth, which was reported earlier in March, was rather low as private sector payrolls rose by only 25,000 jobs in February. The number of jobless claims seen in the four-week average has ticked up by about 20,000 claims since September.
Another growing concern that may pressure employment growth is the recent spike in wages. Many states have recently raised minimum wages, and that trickles up the chain of command in workers for many businesses with multiple pay tiers.
The Labor Department showed that year-over-year wage growth hit 3.4% in February. That is nearly a decade high as average hourly earnings rose 11 cents to $27.66 per hour.
A non-government report from the private sector showed job market cooling in February as well. The ADP private sector payrolls report revealed much better gains than the government did by signaling that there was a gain of 183,000 payrolls in February. While stronger than the government number, this was also not as strong as other prior reports. The economists from ADP and Moody’s who co-author that survey also pointed to a modest slowdown in job growth, and with a sharp decline in small business growth from ADP. Moody’s noted that the economy has throttled back and so too has job growth, with that growth as likely having seen the high watermark for this expansion.
One last issue to consider is that labor force participation rate remains weak by historic and pre-recession standards, even if it has improved. This figure was flat in February over January at 63.2%, but it’s up just 0.2 points from a year ago, and it is not all that much better than the lowest reading of 62.4% from September of 2015. And historic levels ahead of recessions make it even worse for a comparison as the participation rate was measured as 66.2% in January of 2018 and 67.2% in January of 2001.
Federal Reserve Chair Jerome Powell signaled that the Federal Open Market Committee (FOMC) was out of the rate hiking business in 2019 and that the data available today indicate only one more expected rate hike in 2020. And the Fed’s own forecasters now have gradually increased the 2019 unemployment outlook to 3.7% from the 3.5% forecast in December.
It is always important to consider the other side of the coin as well, and that brings up the number of job openings. The Labor Department’s most recent data is January’s JOLTS (Job Openings and Labor Turnover Survey) reading, showing a fresh high of 7.6 million job openings. This was the January data, and many job openings may not be easily fillable due to geographic mismatch, discrepancies over wages offered by companies versus wages expected by workers, ongoing job skill gaps and many other factors.
While the jobs market remains strong, there are some signals out there that the robust jobs market of the past two years is finally starting to see the beginnings of cooling off. That said, these numbers are not indicative of any broad panic or serious concern yet.