Topline
Just one day after job openings plummeted to a nearly two-year low, payroll processor ADP reported private employers added fewer jobs than expected last month as they also started to scale back on wage increases—adding to concerns the economy could face a worse-than-feared recession as the Federal Reserve works to temper stubbornly high inflation.
New data showing worse-than-expected job growth is “one of several signals that the economy is … [+]
Key Facts
Private employment increased by 145,000 jobs from February to March as industries such as finance, professional services and manufacturing lost tens of thousands of jobs apiece—far fewer than the 261,000 new jobs economists had projected, according to the ADP’s National Employment Report released Wednesday.
The latest data is “one of several signals that the economy is slowing,” says ADP chief economist Nela Richardson, who notes pay growth is starting to inch down after plateauing for three months as employers pull back from a year of strong hiring.
ADP’s report comes one day after the Labor Department reported the number of job openings in January fell below 10 million for the first time since June 2021—falling by 632,000 on a monthly basis and down from a record high of nearly 12 million one year ago.
In another sign of cooling, job growth last month was skewed to lower-paying industries such as leisure and hospitality in addition to smaller firms, while employment in large companies was nearly flat, notes Comerica Bank chief economist Bill Adams.
“The economy is unwell, and it could get worse before it gets better,” says EY chief economist Gregory Daco, pointing out hiring efforts have scaled back “notably across numerous sectors” in a sign monthly job growth—as set to be reported by the Labor Department on Friday—could fall to the lowest level since December 2020.
WHAT TO WATCH FOR
The Labor Department releases its monthly jobs report for March on Friday. On average, economists expect the labor market added about 238,000 jobs last month after a better-than-expected 311,000 new jobs were created in February. However, the recent signs of softness could pull those projections down. Comerica projects the economy added about 200,000 jobs in March, while the unemployment rate ticked up to 3.7% from 3.6% in February and a 54-year low of 3.4% in January.
KEY BACKGROUND
Amid waves of layoffs continuing to hit some of the nation’s largest employers, the unemployment rate unexpectedly ticked up in February despite the labor market gaining significantly more jobs than expected. “It’s no longer accurate to say without reservation that the labor market is a bright spot in the economy,” Glassdoor chief economist Aaron Terrazas said after the latest jobs report, noting the waves of recently announced layoffs could ultimately paint a grim picture of the labor market’s trajectory.
TANGENT
Though they’ve rallied from recent bear-market lows, stocks have struggled this week as investors worry the latest labor-market data could indicate the Fed may not be able to curb inflation without tipping the economy into a recession. Consumer prices rose 6% on an annual basis in February, according to Labor Department data—down from a 40-year high of 9.1% in June but still far higher than the Fed’s historical inflation target of 2%. Meanwhile, the central bank has already pushed interest rates up to the highest level in 15 years, fueling a housing market correction, stock market downturn and just last month, a batch of high-profile bank failures.
FURTHER READING
Jobless Claims Unexpectedly Rise To 2023 High (Forbes)
2023 Layoff Tracker: Walmart Cuts 2,000 Workers (Forbes)
Source: https://www.forbes.com/sites/jonathanponciano/2023/04/05/economy-is-unwell-job-growth-unexpectedly-slows-as-employers-scale-back-wages-and-freeze-hiring/