Liz Ann Sonders: Market Snapshot April 2024

Transcript:

Hi everybody, I’m Liz Ann Sonders. Welcome to the April Market Snapshot on which I’ll take a look at the latest labor market data and what it says about the economy and Federal Reserve policy.

[High/Low Chart for Even household employment surged this time for Nonfarm payrolls is displayed]

Each month when the Bureau of Labor Statistics releases its comprehensive jobs report, the two initial headlines—specifically payrolls and the unemployment rate—are actually calculated from two distinct surveys. Here we show monthly payrolls, which come from the Establishment Survey of businesses. There has been a recent reacceleration, with the March report showing a gain of more than 300k jobs. That was well above the consensus estimate, while the prior two months were also collectively revised higher. This is notable given the drop in job growth in December and January. With downward revisions at that time, there was a building concern about a faster drop in payroll growth. Those concerns have been arrested for now. Payroll gains continue to be led by health care, leisure/hospitality, education, and construction; with no industry recording meaningful job losses last month. Notable is that government payrolls jumped the most in a year, with their share of total payrolls up to 14.7% last month, the most since December 2021.

[High/Low Chart for Household survey displayed]

Another bright spot within the report was the rebound in employment from the Household Survey of individuals. Household employment jumped by nearly 500k in March—the largest increase since last November-- and reversing the prior three months of declines.

[High/Low Chart for Few unemployed; employees working more for Unemployment rate is displayed]

Another piece of good news was the tick down in the unemployment rate—which is calculated from the Household Survey. It fell from 3.9% to 3.8%, which means the unemployment rate has been below 4% for 26 consecutive months, the longest streak since the 1960s.

[High/Low Chart for Average weekly hours worked is displayed]

There was also a nice bounce back in average weekly house worked, which rise to 34.4, up from the recent trough of 34.2. That had been the lowest reading since the onset of the pandemic and elicited some concern about slower growth. Cutting hours has been a sign of some labor market softness during this cycle. Typically, layoffs follow significant cuts to the workweek, but the unique nature of this cycle is that employers are wont to hang onto workers. More on that in a minute.

[High/Low Chart for This “part” of the jobs story bears watching for Full-time employment is displayed]

There were a few perceived cracks in the veneer of the strong report; one of which is the continued decline in full-time jobs. They have declined in five of the past eight months.

[High/Low Chart for Part-time employment is displayed]

In contrast, part time jobs continue to increase, with a notable jump in March. The good news is that the number of people working part-time for “economic reasons” dropped significantly. That said, on the surface, falling full-time work and rising part-time work is not the hallmark of a healthy labor market, but there’s an interesting reason for the jump in part-time work. It’s women.

[High/Low Chart for Primed for more work for Overall prime-age labor force participation rate is displayed]

Broadly, labor supply has roared back since the depths of the pandemic—particularly for the prime-age category; notwithstanding the slight dip in March. This remains one of the keys to put downward pressure on inflation.

[High/Low Chart for Women prime-age labor force participation rate is displayed]

The rise in part-time jobs has a lot to do with the significant influx of women into the labor force, who have been particular beneficiaries of the post-pandemic hybrid and more flexible work environment. Future trends in full-time vs. part-time work continue to bear watching, but the analysis needs to sit alongside labor force participation trends.

[High/Low Chart for Layoffs ticking higher a troubling sign for future? for Challenger job cut announcements is displayed]

I mentioned I’d come back to the topic of layoffs. Here we may have a genuine cause for some concern. A key leading labor market indicator is layoff announcements from Challenger, Gray and Christmas. Shown here, they have been picking up, and although the increase in March wasn’t historically extreme, the level of announcements is at its highest since January 2023. So far, the relatively elevated post-2022 average is still fairly low compared to a longer-term history—especially leading into (or already in) recessions. This is another way of showing that, so far in this cycle, labor demand has been cut without a commensurate increase in unemployment.

[High/Low Chart for Taking on more work for Multiple jobholders as % of household employment is displayed]

Another crack in the labor market we need to keep an eye on is the sharp increase in multiple job holders. The measure jumped by more than 200k in March, bringing the cumulative total over the past year to nearly 500k. This in part reflects still-elevated inflation and the fact that some workers have opted to take on second jobs to stretch their budgets. Clearly this bears watching; in particular if inflation doesn’t start to roll back over.

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Let me sum things up. The labor market remains in good shape, with only a few cracks showing up—notably layoff announcements and rising multiple job holders. There was also some weakness in small business hiring intentions per the NFIB release this past week. That said, the labor market has been so resilient that alongside the recent reacceleration, it’s turning some Fed officials more hawkish. For now, the overall labor market story is about both rising labor supply as well as ongoing labor demand; with neither at an extreme relative to the other.

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