What to expect from the jobs report

Minneapolis
CNN
—

The latest monthly jobs report, due out at 8:30 a.m. ET, is expected to show the U.S. economy added 200,000 jobs in December, with the jobless rate holding steady for the third consecutive month at 3.7% .

The Labor Department’s latest monthly employment tally for 2022 likely brings it closer to some familiar stories.

Job growth should stay strongalbeit slower than the blistering pace of historically high job gains during the early stages of the post-pandemic economic recovery.

— Workers are still not returning to hard-hit sectors such as leisure and hospitality, public service and child care.

– The vigor of the labor market, while it is drives the economyis a little too uniformly strong for the Federal Reserve’s needs to reduce inflation by moderating demand.

– The tight labor market needs more workersand wage growth has still not returned to pre-pandemic levels, which would help ease fears of a wage-price spiral, when higher wages lead to price increases which, in turn, lead to an increase in wages.

Later, rinse and repeat.

“The preponderance of evidence suggests that the job market is still a long way from returning to normal,” said Julia Pollak, senior economist at ZipRecruiter’s online job market.

The US labor market remains atypically tight – something that was reinforced on Wednesday when the Bureau of Labor Statistics released it its Job Openings and Labor Turnover Survey (JOLTS) report for November. It showed there were still north of 10.5 million job vacancies, or around 1.7 positions available for every unemployed person looking for a job.

The investigation also showed that this was considered the “Great Resignation” keep moving forward, Pollak said. During the Covid-19 pandemic, a record number of workers voluntarily quit their jobs in search of green pastures — be it better working conditions, higher pay or increased flexibility.

The number of people leaving their jobs per month has now exceeded 4 million for 18 consecutive months. In the two decades before the pandemic, the monthly average was 2.6 million.

“Companies are still struggling with huge retention challenges,” Pollak said.

The latest JOLTS did not show the market relaxing as some may have hoped or expected. But this provided a window into some of the discrepancies occurring at a time when some companies are hiring more to meet consumer demand while others are reducing operations due to crowding, the ripple effects of rates of high interest or preparation for less fruitful economic times ahead.

Industries such as accommodation and food services reported about 50% fewer layoffs in November than seen on average between 2000 and February 2020, Pollak said.

“I think it’s mostly just pre-pandemic recovery,” she said. “Leisure and hospitality is still short of hundreds of thousands of workers and continues to ramp up as expenses have recovered faster than staff.”

In October 2022, the leisure and hospitality sector was still below pre-pandemic employment levels by more than one million jobs, or 6.3%, according to a CNN Business analysis of data on BLS employment.

Tech companies have accounted for the lion’s share of announced job cuts in recent months. During the pandemic, when people were relegated to working and spending their money from home, tech and e-commerce companies banded together to meet the demand.

In 2022, technology was the top industry for job cuts, with 97,171 job cuts announced, according to Challenger, Gray & Christmas’ latest job cut announcement report released Thursday.

Overall, job cuts trended upward in 2022 to 363,824 from 321,970 the previous year. According to the report, 43,651 job cuts were announced in December, a 129% jump from December 2021.

But announced job cuts in 2022 were the second-lowest on record, dating back to 1993, according to data from Challenger, Gray & Christmas. In 2019, 592,556 job cuts were announced.

“The overall economy is still creating jobs, although employers appear to be actively planning for a slowdown,” Andrew Challenger, senior vice president of Challenger, Gray & Christmas, said in the report.

If job gains occur as expected each month on Friday, that would mean the economy has added more than 4.5 million jobs in 2022.

It would be the second highest annual total on record, behind the massive gains of 6.7 million in 2021, which in itself was a pendulum swing from a record 9.2 million job losses in 2020. according to BLS data.

The Federal Reserve would like to see a [monthly job growth] number closer to 100,000 or less,” said Nick Bunker, director of economic research for North America at the Indeed Hiring Lab. “It’s more in line with a sharply cooling labor market.”

Economists also expect average hourly wage growth to slow on a monthly and year-over-year basis, to 0.4% and 5%, respectively, according to Refinitiv.

Wage gains, though outpaced by inflation, remain well above pre-pandemic averages and beyond what the Fed wants to see in its price hike campaign. Chairman Jerome Powell, while acknowledging that wage increases have not pushed inflation to its highest level in 40 years, has repeatedly noted that continued wage growth in such a tight labor market could keep inflation levels high.

“This is a set of labor market data for workers and job seekers, [continued, strong nominal wage growth] this is very positive news,” Bunker said. But for central bankers, they see this as a problem.

Inflation has started to decline in recent months, with major indicators showing declines. But for the Fed to reach its desired 2% inflation target, the labor market will have to take a hit, with unemployment hitting around 4.6% this year, according to central bank projections released in December.

The fact that inflation appears to be easing without the labor market being significantly affected is a sign that much of this very high inflation has not been driven by the labor market and is possible that inflation will decline from these levels. without the labor market being affected,” Bunker said.

“But you don’t know how far inflation can fall without the labor market getting worse, or rather, you don’t know what the underlying pace of inflation is with such a tight labor market. ”

—Matt Egan of CNN contributed to this report.