The recent March Jobs report issued by the US Dept. of Labor has turned the corner on labor in the American economy with a whopping 303,000 non-farm jobs allowing us to stop using the term resilience to describe the steady growth of the labor market over the last four months, in what was expected to have only a number of 212,000 a modest increase considering the previous months revisions.
With a corresponding dip of unemployment to 3.8 %, it is also apparent that with these numbers fears of a recession, often paradoxically hoped for in some quarters, and reverently told to us by random strangers in equally hushed tones; this is now not going to happen.
While some critics, especially some of the curmudgeons in the national media pooh-poohed at the very mention of a “soft landing”, this now appears to be more of a realization than a pipe dream, more than the Federal Reserve could have imagined, or hoped for.
The significance of the report is also borne aloft by the fact that the unemployment figure has held steady, under 4 %, a streak not seen since the 1960s, as The Associated Press heralded in its early coverage.
Of equal significance is that the US economy has gained on average, for the past three months, 276,000 jobs, not seen since the much ballyhooed 251,000 of 2023, and not to be outdone by this is that labor force participation has increased to 62.7 %, with a large surge of 469,000, a hidden gem for Fed Chair Jerome Powell because this has eased the urgency of employers to raise wages to attract workers, and has consequently slowed inflation pressures.
Payroll gains increased by 12 cents on the average at $34.69 an hour, easing wage gain fears that went from 4.3 % to 4.1 %. But it does waggle a finger at the traditional goal of 2 % inflation, along with full employment, the twinned mandate of the Bank, but as we reported last month that goal may reach, according to many observers, a new inflationary standard of 2.5 %, which matches the February increase for inflation, but it should be noted it had fallen from 7.1 % in 2021, and is now 3.2 %.
Despite higher prices, American consumers have continued to buy, and they have less debt to pay off, subprime auto loans aside, and since they are the drivers of the economy, they are in the driver's seat, more often than not, although there is still plenty of complaints to go around, especially with higher grocery store prices, but as we reported in 2023, generally speaking corporate executives realized that consumers were used to paying more, especially with the supply chain bottlenecks during the pandemic, but afterwards keeping them high was to their advantage, and not the fault of President Joe Biden.
If we were to put together the greatest hits of the winners for March we see that health care and social assistance (mostly an umbrella term) covering human services, led at 81,000. The number two spot belongs to local governments who have increased hiring to the tune of 71,000; and construction, still high form February, and still mostly non-residential came in at a strong 39,000, and our old friends in leisure and hospitality, which includes restaurants and bars, raise your glass high people, was at 49,000.
All in all, these stars accounted for 69 % of the hiring in March.
Some, we hesitate to use the term Cassandras, are saying that the high figures for construction were attributable to a mild winter that began in December of 2023, and that may not be sustainable, but again, even with high interest rates there is a true increase, and after all Mother Nature is a fickle figure.
Since this is a presidential election year, and with a deeply polarized country, and a rematch between former President Trump, and Biden, no one is betting the family farm, on who will win, but there is some anxiety as to what could happen: another huge, and permanent tax increase for the wealthiest of Americans, or Biden slaying windmills like Don Quixote, with Ukraine on one side, Gaza on the other and his support for Israel, as an ally; all costing money, not to mention the ongoing migrant crisis with some cities spending millions to care for them with less than desired help from Congress.
Biden has called this report a “milestone” and touted the over 15 million jobs created since he took office, but noted, in full campaign mode, “We’ve come a long way, but I won’t stop fighting for hard working families,” in a statement released by the White House on Friday.
In a recent Wall Street Journal poll of voters from seven swing states, 54% said that Trump would do a better job of handling the economy and Biden coming in at a distant 34 %, but the right leaning Journal is a factor in their reporting.
Inasmuch as any president “controls” the economy, these numbers show that perception is often one-tenth of reality, a perceived one at that.
From that same poll 74 % said that over the last two years, “inflation was moving in the wrong direction.”
Finally, we have the elephant in the room, future interest rate cuts by the Federal Reserve, but as we have often reported, Chair Powell is data driven and will not make hasty, or even feel forced to ask the Federal Open Market Committee for rate cuts unless warranted by the data.
Comforted by the aforementioned soft landing, they are in no hurry to cut rates, although there are predictions that June may see some movemento relief, say many, especially on Wall Street who have “suffered” from the 11 rate hikes from March 2002 through July of 2023, and now is holding them steady between 5.25 % and 5.50 %.
It was later reported by cnbc.com that, “The plot indicated three cuts in 2025 – one fewer than the last time the grid was updated in December. The committee sees three more reductions in 2026 and then two more in the future until the fed funds rate settles in around 2.6%, near what policymakers estimate to be the “neutral rate” that is neither stimulative nor restrictive.”
There are those, as we noted earlier that like to criticize Powell, and among them was Julia Pollak, chief economist at the job market site Zip Recruiter, who in an interview with the AP said, of the March report, “It suggests that the Fed can walk and chew gum at the same time, bringing down inflation without crashing the labor market.”
Ouch!
Powell, true to form, noted after the FOMC meeting: “We believe that our policy rate is likely at its peak for this type of cycle, and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,” and, "We are prepared to maintain the current target range for the federal funds rate for longer if appropriate.”
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