Kiplinger Jobs Outlook: Finally, Signs of a Slowdown

The February jobs report signals a change in direction, but it may take time to arrive.

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It was another strong month for hiring, with 311,000 jobs added in February. Despite that, there are signs of a coming slowdown in hiring, and of increasing slack in the labor market. For example, the unemployment rate moved up to 3.6% from 3.4%. The number of newly unemployed people jumped, as did the number of workers being forced to work part-time instead of full-time. Employment in trucking and delivery services related to e-commerce declined, illustrating that the boom in goods sales is ending. Manufacturing industries are starting to cut back, though slowly. Hiring in the hospitality industry is still in recovery mode, which is why it has been strong recently but is unlikely to maintain that pace as the economy slows. 

Wage growth slowed for all workers in February, to a 3.6% pace over the past three months, though the yearly rate is still 4.6%. We expect that the yearly rate will also slow to around 3.6% before the end of 2023. However, wage growth for production workers rose in February to a yearly rate of 5.3%. We expect this to come down to 4.3% before year-end. 

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But the labor market slowdown will take time. The health care industry is severely short on help, so expect its hiring to stay steady despite any economic downturn. The same is true of K-12 education, where teachers are in short supply.

The Federal Reserve will continue to raise interest rates to try to slow the economy and cool inflation, with quarter-point rate hikes likely at its next three meetings on March 22, May 3 and June 14. The exact pace and size of the hikes will depend on further evidence of a labor market slowdown, and also on upcoming Consumer Price Index (CPI) reports, the next of which will be released on March 14. If Fed Chair Jerome Powell sees continued signs of an economic slowdown in the next few months, it is likely that the Fed will pause its rate hikes.

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David Payne
Staff Economist, The Kiplinger Letter
David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce. David has co-written weekly reports on economic conditions since 1992, and has forecasted GDP and its components since 1995, beating the Blue Chip Indicators forecasts two-thirds of the time. David is a Certified Business Economist as recognized by the National Association for Business Economics. He has two master's degrees and is ABD in economics from the University of North Carolina at Chapel Hill.