Understanding Labor Market Strength

March Job Growth Surges, Defying Slowdown Fears While attention today turns toward the upcoming “Liberation Day” announcement and its potential economic ripple effects, the labor market made its own statement this morning: March job growth surged, defying concerns of a slowdown. According to the latest ADP National Employment Report, private-sector payrolls expanded by 155,000 jobs, well above expectations of 118,000 and more than double February’s total. Produced by ADP in collaboration with the Stanford Digital Economy Lab, the report leverages anonymized payroll data from over 25 million U.S. employees and is widely watched as an early indicator ahead of the official government jobs report. While ADP focuses only on private employment, it often sets the tone for broader labor market expectations. What’s notable is where the strength came from: professional and business services (+57K), financial activities (+38K), and manufacturing (+21K). The manufacturing number is especially striking given that yesterday’s ISM report showed the sector contracting, signaling a complex picture where employment strength and output metrics may be moving on different tracks. Meanwhile, construction, trade, and natural resources posted declines, suggesting pockets of softness still exist. Job gains were broad-based across company sizes, with large employers adding 59K jobs, small businesses 52K, and mid-sized companies 43K. Wage growth continued to cool: job switchers saw a 6.5% pay increase and job stayers 4.6%, narrowing the gap to a record low. This suggests a recalibration of labor leverage as employers hold firmer on compensation and workers grow cautious about switching in an uncertain environment. Taken together with yesterday’s JOLTS data, which showed a decline in job openings, today’s report paints a picture of an economy navigating change, not collapsing under it. The job market remains active, but the sectors and dynamics driving that growth are evolving. While the Federal Reserve doesn’t set policy based on ADP alone, this kind of upside surprise gives the central bank more room to be patient. Strong job growth, tempered wage gains, and mixed sector signals suggest a need for careful observation, not hasty action. For businesses, today’s report signals that hiring pipelines remain open particularly in white-collar and financial sectors, but employers should stay vigilant about shifting costs and demand. For consumers, employment remains a critical source of stability, but flattening wage gains and rising inflation expectations may begin to weigh on confidence and spending. At Havas Edge, we track labor market data closely because it shapes how people feel, how they spend, and what they can afford - three forces that drive the success of brands and businesses alike. #JobsReport #ADP #LaborMarket #EconomicTrends

One job opening for every job seeker—that’s where we stand today. And historically? That’s actually pretty good. Lately, there’s been a lot of noise about how “hard” the job market is. In some industries, that’s valid—oil & gas, for instance, is facing real headwinds due to restructuring and lower oil prices. But if you zoom out and look at the big picture, the labor market is still in solid shape. Let’s talk data: the ratio of U.S. job openings to unemployed persons is currently around 1.0. That means there's roughly one job opening for every unemployed person. The long-term average going back to 2000? Just 0.7. That means we’re still in a better-than-normal environment for job seekers. So why does it feel like a struggle? Because not long ago—in 2021 and early 2022—we hit a peak of 2 job openings per unemployed person. That era created a lot of memorable momentum: -- People were quitting without another offer lined up and landing on their feet. -- Pay raises came easy with job switches. -- Workers had unprecedented leverage. We’re not in that market anymore. But that doesn’t mean today’s conditions are bad. They're just more balanced. We’re still seeing net job creation every month. Unemployment is low at 4.2%. In truth, this job market is strong—just not as surreal as it was a few years ago. And that’s probably a good thing in the long run. Perspective is powerful. Today’s labor market might not feel like 2021, but compared to the past 25 years, it’s still pretty darn good.

Don’t get overly spooked by the rise in the unemployment rate. The labor market is still gliding toward a soft landing. The May 2024 jobs report was a solid one with employers added 272,000 new jobs. The unemployment rate ticked up to 4%, but the rise in can almost entirely be chalked up to workers 24 and under, while prime-age employment rose. Payroll gains were not only large but also widespread. But while there is still a lot of strength in the labor market, its ability to continue to deliver robust gains at these levels will likely be challenged going forward as job openings continue to fall and the economy continues to cool. Payroll gains were once again strong, but continue to be particularly robust in a few sectors. Private education and health services, government, and leisure and hospitality once again contributed the lion’s share of gains, responsible for more than 60 percent of May’s gains. But just because these sectors are powering ahead doesn’t mean other sectors are weak. Interest rate-sensitive sectors, including construction and manufacturing, are still adding jobs. The gains are still broad-based with the diffusion index increasing from last month and remaining well above reading of 50 that indicates growth in most sectors. The rise in the unemployment rate and the drop in employment shown in the household survey are less concerning after a deeper look at the data. The headline number shows employment dropping by 408,000, but all of that drop came from workers aged 16-to-24. Similarly, the unemployment rate for this age group jumped by a full percentage point, while the unemployment rate for workers aged 25-to-54 only barely edged up to 3.3%, where it was two months ago. Wage growth did accelerate from last month’s weak reading, with growth overall continuing to slow only very gradually. On the one hand, relatively firm wage growth will continue to boost household balance sheets and consumer spending. On the other, central bankers at the Fed might be concerned about the upside risk to inflation from stronger wage growth. But given strong productivity growth and the likely continued slowdown to come, they shouldn’t be too upset. The labor market has defied expectations for so long that it might seem invincible. But nothing ever is. The current trajectory is positive, but with declining demand for workers, it can’t hold up forever. We should celebrate the current situation but be alert to the fact that moderation can turn into something more painful.

February Jobs Report: Not too hot, not too cold The #economy added a strong 275K nonfarm payrolls in February, above expectations for 200K jobs added. In the details, various components of the report splashed cold water on the headline strength, painting a picture of a healthy but easing #labormarket that keeps the Fed on track to begin a gradual policy easing cycle this summer. ➡        A tale of two surveys: In contrast to strength in the establishment report, the household survey showed employment declined by 184K, contributing to a jump in the unemployment rate to 3.9% from 3.7%. While this is historically a more volatile (and less indicative) report than the payrolls one, we also saw large negative revisions to the prior two months of payrolls – for a combined 167K lower jobs than initially reported. ➡       Jobs gains strongest in sectors with elevated job openings: Employers are continuing to chip away at excess labor demand with hiring the strongest in health care and social assistance, government, and leisure and hospitality– three sectors that account for nearly half of the remaining job openings in the economy. ➡       Wage growth has backed off after a January bounce: Average hourly earnings rose only 0.1% m/m from a very strong 0.5% January jobs, bringing the year-over-year rate down to 4.3% from 4.4% y/y. This also follows a JOLTS report that showed reduced labor market turnover with both lower openings and lower quits. ➡      More women are working than ever before. Labor force participation for the working-age population was unchanged at 62.5%, but – and in the spirit of #internationalwomensday – it’s notable that female labor force participation for those aged 25-54 is at all-time highs of nearly 78%--an important contributor to the overall strength in job creation in the past year. Overall, the balance of labor market data continues to show a supported labor market that is gradually easing. For the #Fed, this is unlikely to change the script we’ve heard over the last many weeks: disinflation progress is on track and rates are expected to come down this year, just not yet (i.e. until this summer). However, it does add further confidence to the Fed’s ability to manage a soft landing even with a slower pace of policy easing than markets were expecting at the start of this year. 

March Jobs: Calm before the tariff storm 🌩️ 💡 In a week dominated by tariff headlines, the March Jobs report provided some good news, showing a labor market that remained resilient through the first quarter of 2025. However, this report reflects the strength of the labor market as of the “survey week”, which was the second week of March. Events since then, most notably the President’s tariff announcement on April 2nd, suggest a bleaker picture going forward. In the details: ➡️Nonfarm payrolls rose by 228k, well above expectations of 140k. That said, revisions put this report more in line with expectations, removing 48k jobs from the prior two months. Mild weather likely helped boost this figure, as the number of persons working part-time due to bad weather fell to its second lowest March reading since 1977. ➡️Private payrolls rose 209k as services hiring spiked. Healthcare and social assistance (+78k) was, again, the best performing sector. Transportation and warehousing added 23k jobs, likely benefiting from increased activity ahead of tariffs. This sector has added 123k jobs since November, marking its best five-month stretch since 2022. Elsewhere, retail trade added 24k jobs as workers returned to work after a strike, while leisure and hospitality employment rose by 43k after two consecutive months of declines. Across goods-producing sectors, construction employment rose by 13k, but employment in mining and logging and manufacturing was largely unchanged. Government payrolls rose 19k, weighed down by a more modest than expected 4k decline in federal employment. With Challenger layoffs showing huge spikes in government job cuts, federal employment should remain a drag in the coming months. ➡️The unemployment rate ticked higher to 4.2%, although this was largely due to rounding. Positive weather effects were also apparent in wages and average hours worked. Wages rose 0.3% m/m and 3.8% y/y, down from 4% in February, while the average workweek held steady at 34.2 hours. ‼️ Overall, this report showed a labor market entering the second quarter in relatively strong position. That said, with tariffs set to rise to their highest levels in over a century, the path forward could prove difficult. Higher tariffs will likely pressure economic growth and corporate profits, both of which would slow hiring activity. This report did little to counteract the recent sell-off across equity markets, which was further intensified by the announcement of retaliatory tariffs from China. Markets are now pricing in four full cuts in 2025, up from three on April 1st, and a ~40% chance that the Fed cuts in May. That said, the April Jobs report should give investors a better read on tariff impacts, and a better idea of how the Federal Reserve might respond to recent developments.

By This Measure the Economy is Actually Strengthening The labor market is the single most important indicator of the overall health of the economy: healthy job markets mean that workers continue to see income growth, households continue to spend on goods and services, and businesses continue to invest. As in the rest of the economy, "healthy" does not mean "roaring"--it means balanced. The Job Openings and Labor Turnover Survey (JOLTS) released on July 1 estimated the number of job openings nationwide at 7.8 million in May, while the Employment Situation released on June 6 estimated the number of unemployed people at 7.2 million. Typically there are more people actively searching for work than there are job openings, so "Excess Job Openings per Unemployed Person" is typically negative. The labor market has been tight since the pandemic shutdown, but over the past year it has been pretty close to balanced. If the economy were weakening, we would expect to see a return to negative territory--that is, more unemployed people than job openings--but that hasn't happened yet. And if the economy were weakening then the Federal Open Market Committee (#FOMC) would have reason to reduce policy interest rates to stimulate the economy--but that isn't the case yet. On July 3 the Employment Situation for June will be published, and I'll be searching it for signs either of a weakening job market or of a return to an overheated (and therefore inflationary) job market. I expect to update my recession forecasting model, and to publish an article about it on July 7. #macroeconomy #employment #interestrates #macrobond

The labor market has continued to astound with its strength even as interest rates have risen. But as The Budget Lab at Yale has written previously, while the labor market is strong…it is important not to overestimate its strength. One sign of strength in the labor market is whether jobs estimates are getting revised up or down. When the economy is speeding up, previous jobs estimates will often get revised upwards as firms that just opened are late to be included in the estimate, while the opposite will happen when the economy is slowing down. In other words, even if job growth is positive, if it is getting consistently revised downwards, that is a sign that the strength of the expansion is slowing. So where are revisions now? On average, since December 2022 they have been negative – and quite substantially so. In fact – as of August 2024 (the last month for which we have a full third to first estimate history), the revisions over the past 12 months averaged -36,000. That is a size of revision rarely seen in series history outside recessions – the exception being the mid-1980s where you had several years of averaging double digit negative revisions. As The Budget Lab at Yale has emphasized in other pieces about the strength of the labor market – indicators like strongly negative revisions may not signal what they have in the past. The labor market has been slowing down markedly – as expected when job growth post-pandemic was at such a blistering pace. But it is an important reminder that the strength of the labor market should not be taken for granted – and may not be as robust as it first appears. 

The January job openings report pointed to a strong labor market, confirming that the solid 151,000 net jobs added in February reflected underlying strength rather than short-term noise. It was an all-around positive report, with rising vacancies, lower layoffs, and increasing hiring. The quit rate, a proxy for labor demand, also rose in January, indicating that workers were in a stronger bargaining position as demand increased. This should serve as another key data point, following the jobs report, to help alleviate some concerns about the growth scare spreading across the market. The current situation bears a striking resemblance to early 2022, when the economy experienced two consecutive quarters of very slow growth, prompting a market sell-off and calls for an imminent recession. This time, the labor market may once again come to the rescue as one of the few key economic indicators proving otherwise. We anticipate that federal government layoffs will impact the overall labor market in the coming months. However, we believe the private sector should remain strong enough to absorb those job cuts. That said, much will depend on how tariff policies unfold in the next couple of months, as they certainly have the potential to upend the status quo within the private sector.

The U.S. economy added 115,000 jobs in April, significantly outperforming expectations of 65,000. At a time when markets were bracing for softer labor data and rising macro uncertainty, this report delivered a clear upside surprise. The unemployment rate held steady at 4.3%, reinforcing the view that the labor market remains resilient despite ongoing concerns around inflation, energy prices, and geopolitical tensions. Why this matters: Strong employment data signals that businesses are still hiring, consumer demand remains active, and the broader economy continues to show underlying strength. While one report doesn’t define a long-term trend, this is an encouraging sign for markets and policymakers alike. PS: The U.S. economy may be slowing in some areas, but the labor market is still proving more resilient than expected. #JobsReport #NonfarmPayrolls #USEconomy #LaborMarket #EconomicData #Markets #Employment #Business #Macroeconomics