The March jobs report is expected to show the US labor market remained steady last month, but experts say the Iran war has already changed the economic landscape in the weeks since the data informing Friday’s report was collected.
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The surveys carried out by the Bureau of Labor Statistics were completed on March 12. At that time, the full war – which President Donald Trump has given at an uncertain time – had not yet reached the workplace.
Three weeks later, gasoline prices have risen to more than $4 a liter, a level that, if sustained, could cut US consumers hundreds of dollars in annual discretionary income.
On Wednesday, the Atlanta Federal Reserve lowered its real-time estimate of domestic product to 1.9%, down from more than 3% before the war.
However, Friday’s report will have captured some of the growing uncertainty that has helped sink stock markets and higher oil prices over the past few weeks.
“Even before the energy crisis, consumers were facing headwinds from a soft labor market, weak real growth, and a depressed savings rate, and a large survey of Michigan consumers points to a continued decline in consumer spending,” economists at Pantheon Macroeconomics wrote in a note to clients this week. “The rise in gas prices and uncertainty since the start of the war will exacerbate those winds.”
In general, the job market is stagnant – what many experts call a “no-hire, no-fire environment”, in which job cuts and layoffs are taking place.
On Tuesday, the Bureau of Labor Statistics reported that the employment rate in February fell to just 3.1% of the US workforce, the last level recorded in April 2020, as the Covid-19 pandemic subsided. And that’s well above the 2.8% hiring rate recorded during the Great Recession of 2008-09.
Job openings also fell in February, although they appear to have held steady overall. The layoff rate is also at an all-time low.
Meanwhile, many Americans’ views on the economy and Trump’s handling of it continue to deteriorate.
On Wednesday, a CNN poll found that only 31% of respondents approve of Trump’s handling of the US economy, with only 27% saying they approve of his handling of inflation, up from 44% last year. His overall approval rating appears to be holding steady at around 35%.
The debate is already raging over how many jobs the US will need to add each month to keep the unemployment rate — currently 4.4%, or about 7.6 million people — stable.
Last year, a significant reduction in total immigration to the US, as well as an increase in the number of children born to the workforce, means that fewer jobs need to be created for the economy to accommodate newcomers and keep the unemployment rate stable, according to economists at the Dallas Federal Reserve.
That total number of new jobs needed is known as the “breakeven” rate of employment. While in the past it may have required hundreds of thousands of new positions a year to keep the unemployment rate stable and accommodate new entrants, economists wrote in a letter published this week that the unemployment rate is now close to zero.
The unemployment rate is calculated by taking the number of workers actively looking for work and dividing it by the total number of workers, employed and unemployed.
If the overall labor force continues to shrink, fewer new jobs will be needed to include workers entering the workforce, such as recent college graduates or parents who put their careers on hold for a few years.
As long as those forces are working, the number of new jobs needed to be added to keep the US economy growing each month will remain lower than it would be if more immigrants came to the country or fewer workers left the workforce.
That won’t make the job search any easier. The median duration of unemployment is now 2½ months, and the average duration is longer – about six months. About 25% of all unemployed workers have been out of work for at least 27 weeks.
But the current stasis will not last, said Laura Ullrich, director of economic research at Kannete. At some point, companies will decide that they can see past the uncertainty of transportation demand and start making hiring plans – or decide that other jobs are needed.
“One of the two will win,” he said.
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