Is There Reason to Worry About the US Jobs Market?

The analysts' consensus is for relatively modest job growth, but is that setting up for another beat, or is there reason to worry about the US labour market?

Number of Job Openings at Prepandemic Levels

Analysts have nearly consistently underestimated the number of jobs created monthly since the pandemic. The US economy has remained surprisingly resilient despite higher inflation, higher interest rates, and the expectation of a recession later in the year. Despite several high-profile announcements of job cuts over the last several months, with being among the latest, employers have been hiring at a rate exceeding the number of people looking for jobs.

The latest showed that 6.2M people were hired, compared to 5.8M who lost their jobs. The labour churn rate remained high at 4.0M, meaning that the bulk of labour separations and hiring was due to people finding better jobs. However, the number of job openings has declined and fallen below double digits for the first time since the start of the pandemic recovery. There were 9.9M job openings at the end of February, compared to . 331K people found work, but the number of open jobs dropped by 632K in February.

Uniqueness of Situation Might See Eratic Trading Monday

This time, the consensus is for the US to have added a net of 250K jobs, down from the 311K reported for February. The unemployment rate is expected to drop to 3.5% from 3.6% prior. Recently, an increasing number of Fed officials have expressed concern about tightness in the jobs market, which could drive up labour costs and undermine efforts to bring down inflation. Average hourly earnings are expected to repeat the same growth as the prior month of 0.2%, which would still be below the inflation rate.

This time, the release is in a bit of a unique situation regarding the market since trading will be closed when the data is made known. Consequently, there won't be an immediate reaction to the jobs numbers, and there is likely to be an erratic start on Monday with several Asian countries and most of Europe away on holiday. 

Wall Street Eyes Flag Top

The Dow Jones (Wall Street) might have put a low in at 31500, where a potential flag pattern might have been completed. If the advance continues, bulls might face resistance by the upper trendline shy above the 34k handle, with a break higher leading to an extended rally towards 34500 and perhaps 35k. Conversely, sliding under 33k might see increasing bearish bets towards 32500, should the short-term floor at 33250 gives way.

Source: Spreadex / Wall Street

Key takeaways

The US economy has defied expectations of a recession with surprisingly resilient job growth despite high inflation and interest rates. Employers have been hiring faster than the number of people looking for jobs, resulting in 6.2M people hired in February, despite continued announcements of job losses. However, the number of job openings has dropped below double digits for the first time since the start of the pandemic recovery, and the consensus expectation is for only 250K net jobs to have been added in March, with the unemployment rate set to tick down to 3.5%.