TL;DR: This month’s data on labor market turnover was decent, with hiring and quits remaining stable… but worse news probably lies ahead.
This note is split into 3 chunks:
The Big Picture
Data Recap
The Federal Government
1. The Big Picture
If you look at today’s data blissfully unaware of what’s happening in the policy space, it’s a not-bad picture. Hires stopped falling in the second half of 2024 and have been stable since; quits may have levelled out shortly thereafter. Layoffs have gone up a little relative to a year ago, but the increase is small.
But I can’t shake worries inspired by this chart: employers are rapidly turning more pessimistic about future headcount plans, that pessimism is starting to materialize in their actual hiring/layoff actions, and the bad news mostly postdates February.
We’re in a very unpredictable policy environment.1 It’s possible that the policy mix will suddenly shift in a way that restores business optimism and puts a floor under employment. But if it doesn’t, we’re headed for renewed weakness in hiring, and possibly more layoffs.
2. The Data
Nothing in today’s data was novel: It’s a hard time to find a job if you need one, but if you already have one your risk of losing it is (as of February) very low. A silver lining is that nothing is getting worse.
The hiring rate was 3.4% in February, around where it was from the spring of 2013 through early 2014; another way of saying it: last cycle, hiring at these levels was consistent with an unemployment rate just above 7%.
The quit rate was 2.0%, which is also a little on the low side. People know it’s a bad time to look for a job, and are staying put. Last cycle, we saw quits at this level during much of 2015 through early 2016, with an unemployment rate that averaged slightly above 5%.
The layoff rate was 1.1%, very low by historical standards (we only reached that level a few times last expansion). But layoffs have risen relative to a year ago, a pattern observable across a wide range of data source. The increase is small so far.
Finally, on openings, time to dig up the Beveridge Curve again. We’ve been stuck in the lower end of the light blue blob since the 2nd half of 2024. If employment-negative policy remains on the front burner, I think we’ll head further down and to the right.
3. The Federal Government
Federal government layoffs began in mid-February, and are quite apparent in this month’s jobs layoffs. The numbers are quite small - even at their higher level, federal government layoffs account for just 1.2% of total layoffs (vs. 0.3% prior to February). Any impact on other data (hiring, quits, openings) is more muted, and harder to disentangle from the overall pre-February trend.
Based on unemployment insurance data, the yellow line could turn back down at least temporarily in March - though it’s likely to remain elevated for some time, as new layoffs are ongoing, and may spike even higher at some point.
On Wednesday we’re getting more tariffs, and it doesn’t seem like anyone knows how big they’re going to be!