I have lost track of the number of predictions I have read that a recession and high unemployment are coming. There have been a lot since the Federal Reserve began raising interest rates in March 2023. But the closest observers of the labor market are not making those predictions. Even my own gentle prediction that we might be seeing the beginning of a slow and shallow weakening of worker power in the labor market did not point to a recession. And despite it's gentleness, my prediction of only a few weeks ago has not held up.
Every prediction is only as good as the last data release it is based on. On Friday, the Bureau of Labor Statistics will release its jobs, wages, and unemployment report for March, so everything could look different in a few days. Yet, the labor market data released in recent days strongly suggest that labor markets remain strong and workers continue to exercise meaningful individual power in labor markets.
Let’s look at three sets of data. First, initial weekly unemployment claims remain steady and low. In the Labor Department’s report for the week of March 25, workers filed only 198,000 initial claims for unemployment benefits, which was essentially the same as the four-week average. Initial claims is a proxy for layoffs since many, but not all, laid off workers file for unemployment benefits. So, workers are not facing widespread layoffs. Claims and the total number of people receiving unemployment benefits are very slightly higher this year than last year, but not enough to cause significant economic concerns. Of course, the laid off workers are suffering. Unemployment benefits replace less than half of most workers’ wages. Losing a job is frightening and harms workers’ future employment prospects, so it is a serious issue for any worker who encounters it. But these data do not suggest their numbers will grow dramatically any time soon.
Second, and reinforcing the initial claims data, the Job Opening and Labor Turnover Survey (JOLTS) for February was released today and it tells a similar story that layoffs and discharges declined in February after a temporary jump in January. Again, there is no sign in these data of a large increase in the number of workers losing their jobs.
Finally, and just as important as the layoff data, the JOLTS report tells us that the number of workers quitting their jobs in February rose back above 4 million where it had been during every month since August 2021, except January 2023. Most workers quit when they have a replacement job lined up or believe they will find another job fairly quickly. Since only one-in-ten workers in the U.S. has a union in their workplace, quitting may be most workers’ only alternative because they do not have a way to speak out and change condition in their current jobs. Threatening to quit might effect change, but the threat has to be real. Right now, it is.
The one interesting change in the February JOLTS report is that employers' demand for workers appears to be fading. The number of job openings fell below 10 million for the first time since May 2021. Employers' search for workers has slowed fairly steadily as the Federal Reserve increase interest rates and slows the economy. The most interesting aspect of this change is that the decline in employer demand seemingly has not harmed workers. According to the Bureau of Labor Statistics' last employment situation report, jobs growth in February was robust, although slower than the whopping growth of January. There are still more than 1.6 unemployed workers for every open job. Reading these data together with the quits data strongly indicates that workers are not yet getting a sense that their opportunities are drying up.
In sum, these data offer no signs at all that the predictions from some economic pundits that a recession and massive increases in unemployment are true. Again, everything could change later this week when the BLS employmjent situation report for March is released. But after a lot of continuing good news for workers, and a lot of the same wrong predictions, we have to wonder whether some pundits are hoping that wishing will make it so.
