BLS Jobs Report Recap (March)
The state of labor markets in antiquity (3 weeks ago)
TL;DR: This was another decent jobs report reflecting the state of the labor market in mid-March. The outlook has changed dramatically since and we will be looking at worse numbers, potentially much worse, later this year.
Key Data Points:
Unemployment rate: rose a tiny amount, from 4.14% to 4.15% (ok)
Prime working age employment population ratio: fell to 80.4% (not good)
Nonfarm payroll employment: rose by 228K (ok; catchup after 2 bad-weather months)
The rest of this recap is split into 3 sections:
The Big Picture
This Month’s Data
A Weak Economy’s Impact on Older Folks’ Unemployment
Conspiracy Theory of the Month
AI Adoption and Employment Growth
More below chart.
1. The Big Picture
My friend Neil Dutta, Head of Economics at Renaissance Macro Research, has a legendary quote: “The stock market is not the economy, but it’s not NOT the economy.” So later in this report you’ll get all the labor market charts you want, but the most important chart of the day is this one:
The stock market is reacting to policymaking, and in particular to huge tariffs on all major trading partners (and many minor ones, some populated only by flightless birds). If those policies are not reversed very soon, this collapse in financial asset prices will filter into actual employer behavior. That means lower employment and higher unemployment.
I also think that, barring a quick reversal, we’re going to see those bad consequences materializing fairly soon - in the next few months. I don’t anticipate a deterioration of the scope or pace we saw immediately after the collapse of Lehman Brothers or the beginning of COVID, but negative payroll employment numbers and rapid increases in the unemployment rate (0.2-0.3 percentage points per month) seem like a reasonable base case.
2. This Month’s Data
Today’s jobs report covered the period including March 12th - the week of March 9th through 15th for the household survey, and the pay period including the 12th for the establishment survey. Business sentiment had deteriorated substantially by then, but we were still weeks away from the post-April-2nd plunge. And the job market was still in decent - not great, not bad - shape.
Lots of the initial coverage of today’s report focused on the headline nonfarm payroll gains, which beat expectations. 228K is a very good number and it would be pretty impressive to experience it on a consistent basis during a period of slower labor supply growth. But the two prior months, dinged by adverse weather, were increases of only 111K and 117K. So we’re adding about 152K jobs per month to start the year. 152K is a decent number and would be fine during a period of slower labor market growth, just nothing to write home about.
The last 3 months seem sufficient to keep the labor market somewhere between “steady” and “mild gradual cooling”. The unemployment rate increased by a tiny amount in March, from 4.139% to 4.152%. If this was our trajectory over the next year, who would even notice?
Our best all-in indicator of labor market slack, the prime working age employment population ratio, fell to 80.4%, the lowest since November. But again, this is a pretty high value by historical levels and only a little below its cycle high.
We saw a modest increase in unemployment due to permanent layoffs, the most recession-relevant component of unemployment. The jobless claims data, vindicated again.
And in a bit of good news, we saw the share of the labor force working part time for economic reasons declined a teeny tiny bit in March.
Again, it’s neither great nor bad. If this was our trajectory for the foreseeable future we’d feel fine about it, if not excited. But unfortunately our fate is probably worse.
3. A Weak Economy’s Impact on Older People’s Unemployment
Back in February, I published a piece on how the weak hiring environment has disproportionately hurt younger people: they’re having a harder time getting their feet on the career ladder after finishing high school or college. As a result, some of the biggest increases we’ve seen in unemployment have been among high school grads in their late teens and college grads in their early 20s. Older workers, who are more established, have been relatively insulated as they are usually already employed and are experiencing few layoffs by historical standards.
However, if we do experience a faster and more severe weakening of the job market (as I describe in Section 1), then I expect that older workers to unfortunately suffer more as well.
4. Conspiracy Theory of the Month
Today, while spending too much time on social media, I saw someone circulating the following screenshot from the BLS press release and claiming this was an example of the government tinkering with the numbers to cover up federal government layoffs:
To quote a popular tv character, “Piper, noooooo.” This is just BLS’s standard methodology for severance pay and paid leave:
When the federal workers in question run out of severance pay and/or are removed from administrative leave so they are no longer collecting pay, they will no longer count as employed in the establishment survey.
5. AI Adoption and Employment Growth
I’ve started connecting AI adoption data from the Census Bureau’s wonderful Business Trends and Outlook Survey to the monthly BLS time series, as well as other data sets. You can read more about my methodology here.
In March, over 90% of private sector employment growth occurred in industries with medium or medium-low adoption of AI. These industries account for about 80% of private employment, so they punched above their weight.
Taking a longer view, since November 2022 when ChatGPT 3.5 was launched, medium adoption industries have experienced the fastest employment growth. Medium-high and medium-low industries are in 2nd place. High adoption industries (=information services) are in last place.
I’ll be writing more about this tracking effort in the coming weeks. I don’t view it as causal - it’s just about seeing how much exposure workers have to the technology. If you’re interested in which industries fall into each bucket, I created this handy-dandy table. Have a great weekend!
