March 2023 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed nonfarm employers adding 236,000 jobs in March (240,000 expected). January and February employment changes were revised down by a combined 17,000 (January: -32,000; February: +15,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) ticked lower, to 3.5%, as the number of workers who found employment (+577,000) exceeded growth of the labor force (+480,000). 

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Observations from the employment reports include:

* The two surveys were directionally consistent, but job gains were poorly aligned with the number of workers who found employment.

* Goods-producing industries lost 7,000 jobs; service providers: +243,000. Employment continued to trend up in leisure and hospitality (+72,000), government (+47,000), professional and business services (+39,000), and health care (+33,900). Total nonfarm employment (155.6 million) is now 3.2 million jobs above its pre-pandemic level in February 2020 (private sector: +3.5 million; public sector: -314,000). That said, employment is also perhaps 5.6 million below its potential if accounting for growth in the working-age population since January 2006.

Manufacturing lost 1,000 jobs. That result is consistent with the change in the Institute for Supply Management’s (ISM) manufacturing employment subindex, which contracted further in March. Wood products manufacturing was unchanged (ISM unchanged); paper manufacturing: +1,700 (ISM unchanged); construction: -9,000 (ISM rose).

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* The number of employment-age persons not in the labor force fell (-320,000) to 99.5 million; that level is 4.4 million higher than in February 2020. Because the number of employed rose by 577,000, the employment-population ratio (EPR) moved higher -- to 60.4%, which is still 0.7PP below its February 2020 level. 

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* With the working-age civilian population growing by 160,000 and labor force expanding by 480,000, the labor force participation rate inched up to 62.6%. Average hourly earnings of all private employees nudged up by $0.09 (to $33.18), and the year-over-year increase decelerated to +4.2%. Because the average workweek for all employees on private nonfarm payrolls shrank to 34.4 hours, average weekly earnings slipped (-$0.22) to $1,141.39 (+3.3% YoY). With the consumer price index running at an annual rate of +6.0% in February, the average worker keeps losing purchasing power. In fact, average hourly wages have lagged CPI since April 2021; average weekly wages since June 2021.

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* Full-time jobs jumped (+1.16 million) to 134.3 million; there are now nearly 3.6 million more full-time jobs than in February 2020. For perspective, however, the non-institutional working-age civilian population has risen by over 6.6 million during that period. Workers employed part time for economic reasons (shown in the graph above) -- e.g., slack work or business conditions, or could find only part-time work -- inched up by 35,000, while those working part time for non-economic reasons fell (-423,000); multiple-job holders: +75,000. 

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For a “sanity test” of the job numbers, we consult employment withholding/FICA taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in March rose by $55.0 billion, to $312.7 billion (+21.4% MoM; -2.8% YoY). To reduce some of the monthly volatility and determine broader trends, we average the most recent three months of data and estimate a percentage change from the same months in the previous year; the average of the three months ending March was 2.7% above the year-earlier average.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.