If you were planning a doomsday scenario for the February Jobs report from the BLS, you might find it hard to find it in what was released on Friday, for it showed a predictable 151,000 non farm jobs, enough to sustain the US jobs market; but, if you were looking closer you would also find concerns about inflation from consumers as we reported last month, where their confidence has dropped. But, a conundrum for some is that while inflation has creeped up steadily, wages are still high enough to offset the increase.
We still have the heavy hitters: health care, financial services, transportation and social services, are all still in the running, as well as warehousing, all of which points to a steady employment outlook for the moment.
More importantly, the broader outlook seems steady, especially with unemployment at 4.1, and the household rate, one that economists watch more closely, is at 71.1 million, virtually unchanged since February.
What has changed, and what shows concern among many economists and academics is the federal employment reduction, by 10,000 since the beginning of the appointment of Elon Musk and his Department of Government Efficiency by President Donald Trump, and the firings and layoffs of federal employees, designed to reduce, at least at first blush, to save the government money from waste and fraud.
But what in reality, say critics, is an effort to save money for the Trump administration, as it prepares to reignite an increase of the 2017 tax cuts that are due to expire; and, an attempt to raid government coffers to fill the void, which some estimate at 3.3 billion, and judge if a saving of that magnitude is realistic.
A prime example of this were the early efforts to gut the United States Agency for International Development, whose budget was less than 1% of the federal government; falling well short of the mark of eating a huge chunk of government spending. But, politics have taken an equally huge bite into the American economy, and its effect on any reporting cannot be ignored.
Returning to the report, wages have increased to 0.3 % and average $35.93 an hour, enough to meet the demands of inflation currently at 3.00%, up slightly from 2.89% in February.
What worries most consumers are the still higher grocery prices, and especially those of eggs, currently retailing at some discount stores at $4.66 per dozen, but what many are not acknowledging is that this price is attributable to reduced flocks infected with bird flu; and, as some see it, in general, consumers got used to higher overall grocery prices during the pandemic, and some grocers kept them at the same level, defined as price gouging, many are hoping that the president and the treasury secretary address the latter, but that remains to be seen.
In all respects due to change with more DOGE firings, the Labor report noted that, “The number of long-term unemployed (those jobless for 27 weeks or more), at 1.5 million, changed little in February. The long-term unemployed accounted for 20.9 percent of all unemployed people.”
Other markers have remained stable: “The employment-population ratio decreased by 0.2 percentage point to 59.9 percent in February but showed little change from a year earlier. The labor force participation rate, at 62.4 percent, changed little over the month and over the year.”
Of note, “The number of people employed part time for economic reasons increased by 460,000 to 4.9 million in February. These individuals would have preferred full-time employment but were working part time because their hours had been reduced or they were unable to find full-time jobs,” and this has caused some economists, as we have seen, to worry, especially with more federal layoffs on the horizon.
Economists nevertheless, for the moment, have said that February did provide a stable review of the jobs market, and there was this:
“This is a fundamentally healthy labor market, continuing its earlier momentum, albeit at a slightly slower pace,” said Justin Wolfers, an economist at the University of Michigan, to The New York Times.
Sensing trouble on the horizon, DOGE aside, “. . . several labor economists, including Guy Berger at the Burning Glass Institute, a research firm, noted that some trouble may be around the corner, also to the Times.
It was “not a terrible report” but “not a great report,” Mr. Berger said, and “this predates most of the more potent policy actions” from the president.
He joined the crowded field of economists that also, “expects the unemployment rate to continue to rise in the coming months.”
Diane Swonk, KPMG chief economist has written, “The economy will slow down in the first quarter, “ according to her estimates, and later in media reports, she also added that, ““Headwinds are mounting,” and “Uncertainty is paralyzing, and it is showing up everywhere.”
Part of those headwinds are the continuing whiplash of tariffs on Canada, Mexico, China, and Europe which will have a strong effect on the prices that President Trump has ordered, and also the retaliatory tariffs that these countries have issued. As of Wednesday, there was a 25% tariff on Canadian steel and aluminum, but after Canada retaliated with a tariff on electric supply to the US states of Michigan, Minnesota and New York, there was a call to the Premier Doug Ford of Ontario from Washington, that reduced the doubling, if Ford would pull back on the electricity tariff, a move that was accepted.
This move notwithstanding, the prices of protectionism would result in higher costs for American automobiles as well as packaging of beverages in the US, and as most economists know, a reduction of the workforce
With retail taking a nosedive, even after the customary post holiday plunge, to 48, 375, nationwide, further hits on beverage containers would result in those higher prices for consumers, and possible wage reduction for retail workers..
In that vein, the Chicago based firm of Challenger Gray and Christmas reported that, “The Government led all sectors in job cuts in February. Challenger tracked 62,242 announced job cuts by the Federal Government from 17 different agencies last month. So far this year, the Government has cut 62,530, an increase of 41,311% from the 151 cuts announced through February 2024.
“It appears the administration wants to cut even more workers, but an order to fire the roughly 200,000 probationary employees was blocked by a federal judge. It remains to be seen how many more workers will lose their Federal Government roles,” said Andrew Challenger, Senior Vice President and workplace expert for Challenger, Gray & Christmas.
Not that the US economic drama is ending anytime soon, and many eyes are turning toward the Federal Reserve who have given no indication of cutting interest rates, and according to NPR, Powell told a Senate Committee in February that “with a strong market and with inflation still elevated, he and his colleagues, do not need to be in a hurry” to cut interest rates,” and that still is true, although there is widespread agreement that the Trump tariffs will put an upward pressure on inflation, and rule out any interest rate cuts.