This Week’s Economic Update, March 11, 2024

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Happy Spring Break Season.  Hopefully you will be able to take some time off to get away, particularly for those of you who have had a tough winter.  If our winters continue to be like this one, Minnesota may soon be the next big Spring Break destination.

I will be speaking at the ICBA Live conference Saturday the 16th of March.  I hope to see you there.  It is a great event with many wonderful speakers.  Well worth attending.  If you are there, please reach out and say hi to me, always like to connect with anyone I can. Due to my absence, I will be skipping the regular economic update for March 18, and return on March 25. 

The job report numbers released by the Bureau of Labor Statistics on Friday really need to be examined deeper.  There are undercurrents that are showing less strength in the labor market than the media appears to be portraying.  While the new job numbers appear strong, the percentage of part time hires is rising, sometimes at the expense of full time offerings.  Many employers are reluctant to hire full time due to ever increasing labor costs.  Between benefits and wages, firms are struggling to control their operating cost margin.  Part time offerings allow much more flexibility for companies to reduce overhead without incurring unemployment cost.

According to the BLS report, long term job losses increased by 174,000 while non-farm payrolls increased by 275,000.  This leads to the question of why the unemployment rate would rise from 3.7% to 3.9%.  Any increase is typically due to previously discouraged workers coming off the bench and actually looking for a job.  Another reason of course, is increasing layoffs.  Neither of these issues are occurring based on the report.  The only explanation that I can come up with relates to the revisions that have occurred over the prior two months. 

The revisions raise some serious questions as to the accuracy of the information shared by the BLS.  The original new jobs reported in December were 333,000.  This was revised downward to 290,000.  The January number, which I questioned at the time, was reduced from 353,000 way down to 229,000 in this month’s report.  That amounts to 167,000 fewer jobs than were originally reported.  That may be enough to push the unemployment rate up. That is about the largest two month revision I have ever seen in the numbers.  If the bankers I train could not estimate cash flow any better than the BLS estimates job numbers, I would hang it up.

This is not to say the job market is softening significantly.  The numbers, when reviewed at over the last quarter, reflect a static position.  The number of open jobs has been flat at just under 9 million.  The level of job quits are flat.  Likewise with new job cuts and the average number of continuing jobless claims, they are all remaining rather flat.  It appears that the job market has reached a level of equilibrium, not strong, but also not weak.

The service sector continues to exhibit strength.  The ISM Service Report reflects continued growth.  The business activity improved from 55.8 to 57.2.  New orders improved from 55 to 56.1.  Inventories have contracted from 49.1 to 47.1.  This indicates that the consumer, while cautious, continues to spend, in spite of the inflation levels.

The manufacturing sector continues to contract.  Factory orders remain soft.  This has been exasperated by the issues we have heard about from Boeing.  The February total vehicle sales were up, 14.92 million to 15.81 million.  That jump was primarily due to added incentives as well as price cuts on vehicles as inventories at dealerships are currently too high.

Have a Great Week.



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