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Hiring & Wages Rise in March

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Payroll employment is expected to increase by 480,000 in March after rising 678,000 in February. Public sector payrolls could actually lose ground during the month as state and local governments continue to lose teachers and principals to the private sector; a poll during the height of the Omicron wave in January showed that more than half of teachers wanted out of the profession.

Gains in the private sector are expected to continue to be broad-based. The hospitality sector continued to improve with seatings and walk-ins at OpenTable continuing to grow from the lows of the Omicron wave. Hotel occupancies picked up along with TSA throughput as travel for spring breaks rebounded.

Retail was boosted by people buying clothes to travel and show up in offices again. I had to dust off my heels recently for a business trip; most have not been worn in more than two years. (I might have to convert to flats permanently.)

The surge in inflation is expected to take a bigger toll on spending in the goods sector than the service sector. Big-box discounters suffered in February even before we saw the additional surge in prices at the gas pump associated with the war in Ukraine.

Manufacturing activity is expected to continue to recover with a rebound in production in the light vehicle sector adding to overall gains. The supply chain problems due to lockdowns in China and the war in Ukraine were slower to hit the U.S. than Europe. That survey was also taken early in the month, prior to the worst disruptions and sanctions.

Professional services are expected to remain on a tear. Demand for accountants, in particular, has skyrocketed in response to the jump in mergers and acquisitions and more stringent net-zero targets. They play a key role in valuations and affirming whether firms are meeting their ESG goals and requirements.

Average hourly earnings are expected to rise 0.4% during the month and increase 5.5% from a year ago. That would mark a reacceleration in wages from February but lag overall inflation, which likely rose nearly 8.5% from a year ago in March. The risk on wage gains is to the upside, given announcements by big-box discounters and online retailers to further boost wages.

Separately, the unemployment rate is expected to fall to 3.7%, a new pandemic low and only slightly above the 3.5% pace we saw in February 2020. Labor force participation is expected to edge up to 62.4% from 62.3%.

Higher wages, more consistent school schedules and inflation are all bringing workers in from the sidelines. One of the largest gains has been among Black men, whose participation rate surged above the level prior to the pandemic.

Those over 65 have begun to return to work after retiring during the pandemic; it is tough to make ends meet on a fixed income.

Multiple job holders are increasing; people with full-time jobs looking for a few extra hours per week are leading those gains. One of the benefits of the initial surge in wages was that more people were able to make ends meet with just one full-time job; that advantage has been eroded by the surge in inflation.

The largest hurdles for those on the sidelines remain child care and mobility. Many no longer live where jobs are available and/or can’t afford the commuting costs associated with expanding their search.

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