by tyler | Apr 7, 2023 | CNN, economy
The latest monthly jobs report showed that US hiring slowed in March but remained robust, with gains in service-providing businesses like bars and restaurants, but weakness in construction and manufacturing.
Leisure and hospitality fueled last month’s growth in payrolls, a trend that has held firm since the economy started its recovery from the pandemic. Government employers and the professional and business services industry also hired at a solid clip last month. But employment shrank in construction, manufacturing, and nondurable goods.
Here’s a look at where employment grew last month and where it shrank, according to the Bureau of Labor Statistics’ report.
Leisure and hospitality employers added 72,000 jobs last month, the most of any industry. But the sector is still 2.2% below pre-pandemic staffing levels and added a smaller-than-average number of jobs in March than in the six prior months.
“The gains we continue to see in health care and leisure and hospitality are because those industries are still trying to recoup earlier losses,” said Diane Swonk, chief economist at KPMG. “So, the services sector held up but showed some signs of cooling.”
Government employers added 47,000 jobs in March, led by hiring from state and local governments, which typically struggle to add workers in a tight labor market. Health care businesses added 34,000 jobs and employment in the business services sector — which includes many white-collar jobs such as accountants, engineers, and consultants — grew by 39,000. Government jobs also remain 314,000, or almost 1.4%, below their pre-pandemic level.
Cracks are beginning to form in the goods-production part of the labor market, however. The construction industry lost 9,000 jobs in March, the first decline in construction employment in more than a year and the largest job loss in the sector since May 2021 -— though still a drop of just under 1.1%.
Demand for housing tanked at the end of last year when aggressive rate hikes from the Federal Reserve pushed up borrowing costs for home buyers. But while new residential construction has slowed over the past year, construction jobs have held up, mostly because of a backlog in construction projects, Swonk said. She added that the March decline in construction employment is attributed to weak demand for housing and “unusually harsh spring weather.”
One other casualty of the Fed’s rate hikes is manufacturing, which also lost jobs last month, according to the BLS.
“Manufacturing is one of the most interest-rate sensitive industries, as much as technology and financial services, so it’s not surprising to see the job losses there,” said Sinem Buber, lead economist at ZipRecruiter.
Data from the Institute for Supply Management released this week showed that the manufacturing sector contracted in March for the fifth month in a row. The survey’s index fell to its lowest level since May 2020.
The nondurable goods industry also saw a pullback in hiring, which was likely due to weaker consumer demand for clothes and household products, Buber added.
“Those goods are a bit more responsive to any changes in the market, and that’s why we’re seeing that industry respond faster than durable goods,” Buber said.
Temporary jobs also declined by nearly 11,000 in March, which could be an indicator that the labor market is going to soften further in the coming months, according to Beth Ann Bovino, US chief economist at S&P Global.
“If you start to see a reduction in temporary hires, that usually means that businesses are seeing some softness in the revenue stream, which is one of the first signs of an easing in the jobs market,” Bovino said.
by tyler | Apr 7, 2023 | CNN, economy
The banking crisis caused by the recent collapse of Silicon Valley Bank and Signature Bank has increased the odds of a US recession, JPMorgan Chase CEO Jamie Dimon told CNN’s Poppy Harlow in an exclusive interview on Thursday.
Speaking in his first interview since the failure of SVB, Dimon said that while the banking system is strong and sound, the recent turmoil around the financial system is “another weight on the scale” towards recession.
“We are seeing people reduce lending a little bit, cut back a little bit and pull back a little bit.” While the banking chaos won’t “necessarily force a recession,” he said, “it is recessionary.”
There are storm clouds ahead for the economy, said Dimon. The Federal Reserve’s current tightening regimen, plus higher, sticky inflation and Russia’s war on Ukraine are the largest risks he sees for the economy. But Dimon said he does feel hopeful about the strength of human capital in the United States.
“I’m a red-blooded, full-throated, free-market, free-enterprise capitalist,” said Dimon of supporting local entrepreneurship. “I think we should applaud free enterprise and we should sing from the hills the benefits while we fix the negatives, as opposed to denigrate the whole thing.”
D
imon sat down with Harlow after the opening of Chase’s Atlanta community branch. The Atlanta bank is Chase’s 16th branch built in conjunction with local communities and which host free events, financial health workshops and skills training for locals. Community branches also provide storefront spaces for small business pop-ups.
These branches, said Dimon, are not charity in any form. They’re good for business. “We need to get money into local communities,” he said. Part of that is as simple as opening a savings account. “A lot of us had moms and dads who took us to open our first accounts,” he said. “And then you see your money go from like $84.75 to $85.17. It was like magic, that interest.”
Dimon said that is part of what he hopes to achieve with his community branches.
“We don’t want people to be afraid to walk into a branch here. Come as you are, bring your kids and learn,” he said.
As part of the initiative, Chase has hired a number of community managers with the express purpose of encouraging those who don’t feel comfortable in a bank setting to come in and learn about their finances.
This role, he said, is essential and is often filled by regional, mid-sized community banks, which is partially why the recent failures of SVB and Signature and the possibility of contagion were so harrowing.
Dimon said he isn’t sure if the US economy is through the thick of the current banking crisis just yet.
“I’m hoping it will resolve, you know, rather shortly,” he said.
Dimon said he doesn’t know if more banks will fail this year, but was quick to point out that this turmoil is nothing like the financial crisis of 2008. In 2008, he said “it was hundreds of institutions around the world with far too much leverage. We don’t have that.”
We don’t have huge problems in our mortgage markets, either, he added. “This is nothing like that. And the American public shouldn’t think that.”
Still, said Dimon, it’s okay to let some banks collapse. “Failure is okay,” he said. “You just don’t want this domino effect.”
Dimon warned that regional banks — and American consumers — should “be prepared for higher [interest] rates for longer. I don’t know if it’s going to happen, but be prepared for that tide.”
There’s a good chance, he said, that rates remain higher for longer — and banks invested in Treasuries need to be prepared for that possibility.
Lawmakers are growing more uneasy about raising the debt ceiling, the self-imposed $31.38 trillion borrowing limit they hit in January. Without new legislation, a default by the US government could come over the summer or in early September, according to various analyses.
But talks between House Republicans and the White House remain stalled.
Dimon, who has worked closely with the White House and Congress this year on various economic problems, told Harlow that there would be no default under his watch. “Not as long as I’m alive. Boy, we’re going to keep fighting this one” he said.
Dimon said he believes Congress will come to a resolution on the debt ceiling within the next few months, but that there could be more economic pain to come before an agreement is made.
“You’ll feel the pain before it happens,” he said of breaching the debt ceiling. As a potential default comes closer “you’ll see it in the markets and that will scare people,” he said.
Still, “When I go to Washington, most people there know how serious this is, and they want to get it to a resolution.”
Dimon served on former President Donald Trump’s business council, and while he doesn’t think that Trump’s indictment and the criminal charges the former president faces this week will impact the economy, he does believe that Trump enacted some good economic policy.
“There are policies that he did that are good,” Dimon told Harlow. “I think the tax reform actually brought a trillion dollars back to America. The Black community had the lowest unemployment rate ever in his last year because it grew the economy.”
That’s not an endorsement, he was quick to add. “That’s not supporting him. That’s just saying that’s true.”
Dimon also commented on another potential 2024 Republican presidential candidate, Florida Governor Ron DeSantis.
Last year, Florida passed legislation to limit discussions of LGBTQ issues in Florida schools, a bill that opponents referred to as the “Don’t Say Gay” law. Disney objected to the law and the state of Florida has since taken action to strip Disney of some of the powers it had over the land that includes and surrounds Disney World.
Those actions prompted Disney CEO Bob Iger to call DeSantis’ actions, and the law “anti-business.”
Dimon on Thursday said that “we support the LGBT community aggressively and actively,” and confirmed that he will continue to do so despite DeSantis.
Read the full transcript here.
by tyler | Apr 7, 2023 | CNN, economy
US employers added just 236,000 jobs in March, coming in below expectations and indicating that the labor market is cooling off amid the Federal Reserve’s yearlong rate-hiking campaign to chill inflation.
The unemployment rate dropped to 3.5%, according to the March jobs report released Friday by the Bureau of Labor Statistics.
Economists were expecting a net gain of 239,000 jobs for the month and a jobless rate of 3.6%, according to Refinitiv. This is the first jobs report in 12 months that came in below expectations.
While the US labor market has kept trucking along despite other areas of the economy slowing under the weight of interest rate hikes, it is showing some signs of cooling.
“The labor market in March came in like a lion with a banking crisis and more layoffs, and is going out like a lamb with a solid jobs report,” said Daniel Zhao, Glassdoor’s lead economist, in a statement. “The labor market is still strong, but it’s gliding slowly back down to Earth.”
March’s total is a notable reduction from February’s upwardly revised 326,000 jobs gained and January’s monster jobs number — originally 517,000 but subsequently revised down to 472,000.
The 236,000 jobs added during March is the smallest monthly gain since a decline in December 2020. Excluding the losses seen during the first year of the pandemic, it’s the smallest monthly jobs gain since December 2019.
Industries such as leisure and hospitality, health care and government continued to lead the way in job gains. Industries reporting monthly losses included retail trade, temporary help, manufacturing, construction and information services.
The Fed wants to see more slack in the labor market: As the economy recovers from the pandemic, the demand for workers has far exceeded the supply, contributing to higher wages and inflationary pressures.
Contributing to the tightness has been a smaller-than-expected labor force and participation rates that were slow to match projections or meet pre-pandemic levels.
During the past two and half years, a lot of ink has been spilled on the question of why workers were “missing,” with recent research zeroing in on Covid-19 deaths, reduced immigration, aging population and long Covid as the primary culprits.
Workers are now filing back into the labor market.
In February, the labor force participation rate for workers between the ages of 25 and 54 hit 83.2%, surpassing pre-pandemic levels. And last month, the overall labor force participation rate continued its upward march, increasing to 62.6% and matching a pandemic-era high. But that’s still below the February 2020 rate of 63.3%.
Average hourly earnings grew 0.3% from the month before, a slight uptick from the 0.2% seen in February. On an annual basis, earnings increases moderated to 4.2% from 4.6% the month before.
The average workweek inched down to 34.4 from 34.5 hours.
“The labor market continues to remain resilient and is a pillar of strength,” said Zhao. “The Fed is looking for balance from the labor market, and today’s report is a step in the right direction.”
This story is developing and will be updated.
by tyler | Apr 6, 2023 | CNN, economy
The banking crisis caused by the recent collapse of Silicon Valley Bank and Signature Bank has increased the odds of a US recession, JPMorgan Chase CEO Jamie Dimon told CNN’s Poppy Harlow in an exclusive interview on Thursday.
Speaking in his first interview since the failure of SVB, Dimon said that while the banking system is strong and sound, the recent turmoil around the financial system is “another weight on the scale” towards recession.
“We are seeing people reduce lending a little bit, cut back a little bit and pull back a little bit.” While the banking chaos won’t “necessarily force a recession,” he said, “it is recessionary.”
There are storm clouds ahead for the economy, said Dimon. The Federal Reserve’s current tightening regimen, plus higher, sticky inflation and Russia’s war on Ukraine are the largest risks he sees for the economy. But Dimon said he does feel hopeful about the strength of human capital in the United States.
“I’m a red-blooded, full-throated, free-market, free-enterprise capitalist,” he said. “I think we should applaud free enterprise and we should sing from the hills the benefits while we fix the negatives, as opposed to denigrate the whole thing.”
Dimon said he isn’t sure if the US economy is through the thick of the current banking crisis just yet.
“I’m hoping it will resolve, you know, rather shortly,” he said.
Dimon said he doesn’t know if more banks will fail this year, but was quick to point out that this turmoil is nothing like the financial crisis of 2008. In 2008, he said “it was hundreds of institutions around the world with far too much leverage. We don’t have that.”
We don’t have huge problems in our mortgage markets, either, he added. “This is nothing like that. And the American public shouldn’t think that.”
Still, said Dimon, it’s okay to let some banks collapse. “Failure is okay,” he said. “You just don’t want this domino effect.”
Lawmakers are growing more uneasy about raising the debt ceiling, the self-imposed $31.38 trillion borrowing limit they hit in January. Without new legislation, a default by the US government could come over the summer or in early September, according to various analyses.
But talks between House Republicans and the White House remain stalled.
Dimon, who has worked closely with the White House and Congress this year on various economic problems, told Harlow that there would be no default under his watch. “Not as long as I’m alive. Boy, we’re going to keep fighting this one” he said.
Dimon said he believes Congress will come to a resolution on the debt ceiling within the next few months, but that there could be more economic pain to come before an agreement is made.
“You’ll feel the pain before it happens,” he said of breaching the debt ceiling. As a potential default comes closer “you’ll see it in the markets and that will scare people,” he said.
Still, “When I go to Washington, most people there know how serious this is, and they want to get it to a resolution.”
This story will be updated.
by tyler | Mar 31, 2023 | CNN, economy
The Federal Reserve’s preferred inflation gauge cooled back down in February after ticking up unexpectedly the month before, a welcome sign in the central bank’s long battle to bring down historic price increases.
The Personal Consumption Expenditures price index rose 5% for the 12 months ended in February, lower than January’s downwardly revised 5.3% gain, the Commerce Department reported Friday.
On a monthly basis, prices were up 0.3%, a cooling from January’s 0.6% surge.
Economists were expecting a monthly gain of 0.2%, according to Refinitiv.
The core PCE index, which excludes the more volatile food and energy categories, showed prices increased 0.3% on a month-on-month basis and rose 4.6% on an annual basis. In January, the core PCE index was up 4.7% year-over-year.
Consensus estimates from economists forecast the core PCE index would rise 0.4% from the prior month and 4.7% year over year.
PCE, specifically the core measurement, is the Fed’s favored inflation gauge since it provides a more complete picture of costs for consumers.
Consumer spending rose 0.2% in February, representing a sharp cooldown from January’s hot reading of 1.8%, according to the report.
Personal incomes grew 0.3% last month and the personal savings rate, which is personal savings as a percentage of disposable personal income, gained 0.2 percentage points to 4.6%.
This story is developing and will be updated.
by tyler | Mar 30, 2023 | CNN, economy
The US economy grew at a slower pace in the fourth quarter than initially estimated, as consumer spending continued to trail off.
Inflation-adjusted gross domestic product — the broadest measure of economic activity — increased 2.6% for the final three months of 2022, according to the Commerce Department’s third and final reading for the quarter. Economists were expecting GDP growth to hold steady at 2.7%, according to Refinitiv.
In the Commerce Department’s first two reads of fourth-quarter GDP, the growth was initially estimated at 2.9%, then revised down last month to 2.7%. Concurrently, consumer spending trended down as well, decreasing from 2.1% in the first read to 1.4% in the second revision and landing at 1% in the final print, released Thursday morning.
Last quarter’s 2.6% expansion was a deceleration from the 3.2% annualized growth recorded during the third quarter. In addition to slowing consumer spending, downturns in exports, non-residential fixed investment, and state and local government spending contributed to the step back in growth.
The index that measures prices paid for personal spending, known as the PCE Price Index, was 3.7% in the quarter, steady with the previously reported level.
2022 marked a year of transition for the United States as its economy continued to recover from the pandemic. Imbalances in trade and inventories had an outsized effect on the GDP data in the earlier parts of the year, while the second-half growth was fueled by consumer spending.
“Everyone was going out and shopping and spending and traveling … and these factors drove a fairly solid expansion for the economy last year,” said Oren Klachkin, a US economist at Oxford Economics, in an interview with CNN.
That spending also helped drive increases in business investment, he added.
However, 2023 is shaping up to look very different from the bulk of last year, he said.
“We’re going to have tighter lending conditions, high inflation, the [Federal Reserve’s] rate hikes are going to have a larger impact on the economy,” he said. “So we shouldn’t expect the expansion to be as strong this year as it was in 2022.”
Oxford Economics is projecting 2.5% GDP growth during the first quarter of the year and a mild recession to occur in the second half of 2023. The Atlanta Federal Reserve’s GDPNow estimate is at 3.2% for the first quarter.
For the full year, expectations have dampened. Following the collapse of Silicon Valley Bank, which roiled the banking industry, Goldman Sachs cut its outlook for economic growth in 2023 by 0.3 percentage points to 1.2%
