March jobs report may show labor market stable before Iran war

The March jobs report is expected to show that the U.S. job market remained relatively stable last month, but experts say the war in Iran has already changed the economic landscape in the weeks since the data that informs Friday’s report were collected.

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The surveys conducted by the Bureau of Labor Statistics were completed on March 12. At the time, the shock of war — for which President Donald Trump set an uncertain timetable — had not yet hit the job market.

Three weeks later, gasoline prices soared to more than $4 per gallon, a level that, if sustained, would deprive American consumers of hundreds of dollars in annual discretionary income.

On Wednesday, the Atlanta Federal Reserve lowered its real-time gross domestic product estimate to 1.9 percent, from more than 3 percent just before the war began.

Friday’s report will nonetheless have captured some of the growing uncertainty that has contributed to falling stock markets and soaring oil prices in recent weeks.

“Even before the energy shock, consumers faced headwinds from a sluggish job market, weak real income growth, and an already depressed personal savings rate, with the Michigan Consumer Survey’s Major Purchases Index indicating a continued slowdown in spending on goods,” economists at Pantheon Macroenomics wrote in a note to clients this week. “The surge in gas prices and the impact on confidence since the start of the war will worsen these headwinds. »

Generally speaking, the job market remains stalled – what many experts call a “no hire, no fire” environment, in which layoffs and new placements are moderate.

On Tuesday, the Bureau of Labor Statistics reported that the hiring rate in February fell to just 3.1% of the U.S. labor force, a level last recorded in April 2020, as the Covid-19 pandemic deepened. And that rate is only slightly higher than the 2.8% hiring rate recorded at the height of the Great Recession of 2008-2009.

Job openings also declined in February, although they appear to be stabilizing overall. The layoff rate also remains at a historically low level.

Meanwhile, many Americans’ views on the economy and Trump’s handling of it continue to sink to new depths.

On Wednesday, a CNN poll found that just 31% of respondents approve of Trump’s handling of U.S. economic performance, and just 27% say they approve of his handling of inflation, down from 44% a year ago. His overall approval rating appears to have stabilized at around 35%.

There is currently an ongoing debate over how many jobs the United States would need to create each month to keep the unemployment rate – currently at 4.4%, or about 7.6 million people – stable.

Over the past year, a massive reduction in overall immigration to the United States, coupled with a growing number of baby boomers leaving the workforce, means that fewer jobs must be created for the economy to absorb new labor market entrants and keep the overall unemployment rate stable, according to economists at the Dallas Federal Reserve.

This overall number of new jobs needed is known as the “equilibrium” employment rate. While in the past it would have been necessary to create hundreds of thousands of new jobs per year to keep the unemployment rate stable and accommodate new arrivals, economists wrote in a note published this week that the equilibrium employment rate could now be close to zero.

The unemployment rate is calculated by taking the number of workers who are actively looking for work and dividing it by the total labor force, both employed and unemployed.

If the overall workforce continues to shrink, fewer new jobs will be needed to accommodate workers entering the workforce, such as recent college graduates or parents who have put their careers on hold for a few years.

As long as this dynamic remains in effect, the net number of new jobs that must be created each month to keep the U.S. economy growing will remain lower than it would be if many immigrants arrived in the country or if fewer workers retired.

This won’t necessarily make finding a job easier. The median period of unemployment is now around 2 1/2 months, with the average being much longer – around six months. About 25% of all unemployed people have been out of work for at least 27 weeks.

But the current stagnation cannot last, said Laura Ullrich, director of economic research at Indeed. At some point, companies will decide that they can either move past the uncertainty and consider a recovery in demand and begin planning for hiring, or decide that additional layoffs are necessary.

“One of them will win,” she said.