A worker stocks shelves at a CVS Pharmacy store on February 07, 2024 in Miami, Florida.
Joe Rydell | Getty Images
US job growth will likely slow in February while still far from stalling speed as companies continue to maintain demand for workers.
When the Labor Department releases its nonfarm payrolls report on Friday at 8:30 a.m. ET, it is expected to show growth of 198,000 and the unemployment rate to hold at 3.7%, according to Dow Jones estimates.
If the forecast is close to accurate, it would represent a significant shift from January's massive growth of 353,000, but it still represents a fairly vibrant job market.
“This is kind of a cautious labor market,” said Julia Pollack, chief economist at ZipRecruiter. “Employers are hiring to keep up with business activity.” “Many companies are still reporting higher-than-expected sales. But they are not hiring aggressively for growth and expansion. For this reason, many are still taking a wait-and-see approach.”
The increase in January followed a strong increase of 333,000 in December, which seemed to contradict the picture of a worrying employment climate.
However, Pollack noted that both numbers were inflated by seasonal distortions, with retailers in particular cutting holiday jobs less than expected. Pollack said February could see growth of up to 240,000, as companies look to fill a high level of open positions.
Too much growth?
ZipRecruiter's quarterly survey of job seekers showed that medium-term expectations are at an all-time high, while applicants also indicated stronger levels of confidence in their financial well-being and the current state of the job market.
Under normal circumstances, these would all be positive traits. But there are other concerns now.
A still-hot jobs market could prevent the Fed from cutting interest rates this year as expected. Earlier this week, Atlanta Fed President Rafael Bostic expressed concern about the potential “pent-up exuberance” that could be unleashed in the business community after the central bank begins monetary easing.
“Once interest rate cuts start, it will give a boost to some industries that have been waiting for them, especially when it comes to capital investments,” Pollack said. “Many companies are still sitting back and waiting. Manufacturing is going to be very interesting. Recently there has been some improvement in job openings in durable goods manufacturing. Checks are arriving in the mail.”
Markets expect the Fed to begin cutting interest rates in June, although expectations have become less certain in recent weeks as policymakers consider the direction of inflation.
Despite uncertainty over monetary policy, companies have pressed ahead with hiring.
There have been mixed signals regarding layoffs. This was the largest February month for announced layoffs since 2009, according to Challenger, Gray & Christmas, but workers appear to be able to find other jobs quickly, as evidenced by little change in weekly jobless claims with the Labor Department.
The department's January job openings and turnover survey, released earlier this week, showed that layoffs actually declined during the month and were down about 16% from a year ago. Job openings were little changed during the month but were down 15% from the same period in 2023. Job openings outnumbered available workers by 1.4 to 1, down from 1.8 to 1 over the year.
“I haven't seen layoffs,” said Tom Gimple, founder and CEO of LaSalle Network, a recruitment and staffing firm. “What I always see is that the small and mid-sized market is seeking market share, and hiring seems to be in that category. They're hiring people that big companies, especially big tech companies, are laying off.”
Demand remains strong
In fact, a continuing wave of layoffs at giant tech companies has been grabbing headlines lately. This trend continued in February, with job site Indeed reporting a 28% drop in job postings for software development and a 26% drop in information and document design.
But other sectors are still showing demand. Vacancies increased by 102% for doctors and surgeons, 83% for therapists, and 82% for civil engineering.
In the Fed's latest study of economic conditions, the Fed found that a very tight labor market has loosened somewhat, but there are still pockets of activity.
“Businesses have generally found it easier to fill job openings and find qualified applicants, although difficulties remain in attracting workers for highly skilled positions, including health care professionals, engineers, and skilled trades professionals such as welding and mechanics,” the Fed said in its report. “. The “Beige Book” report was released on Wednesday.
The report precedes each Federal Reserve meeting by two weeks and helps inform policymakers on trends across the economy. Business contacts indicated that wages were continuing to rise, but at a slower pace. Wage gains are an important piece of the inflation puzzle.
Friday's report is expected to show average hourly earnings rose just 0.2% during the month, down from a 0.6% jump in January, though they still increased at a 4.4% rate. The big monthly move in January was largely the result of a decline in the average workweek, adding to the emergence of average hourly earnings.
Even with hotter-than-expected inflation numbers, Federal Reserve Chairman Jerome Powell said Thursday that the central bank is “not far away” from gaining enough confidence in the path of inflation to start cutting interest rates.
“A lot of the hourly wage increases have been driven primarily by two things: more liberal municipalities, and a scarcity of workers from COVID,” Gimbel said. “I don't see much growth in wages this year.”
