US Employment Indicator Dips, Predicting a Decline in Jobs

Although the jobs market is ‘healthy overall,’ there is a risk of slowdown in hiring, an economist say.

People line up as they wait for the JobNewsUSA.com South Florida Job Fair to open at the Amerant Bank Arena in Sunrise, Fla., on June 26, 2024. Joe Raedle/Getty Images

A leading indicator forecasting employment changes fell in February, signaling upcoming job losses in the near term, according to think tank The Conference Board.

The Conference Board’s Employment Trends Index (ETI), which forecasts potential shifts in the job market, declined to 108.56 in February from 109.45 in January, the group said in a March 10 statement. A decline in the index suggests employment is likely to fall. “The ETI fell in February to its lowest level since October,” said Mitchell Barnes, economist at The Conference Board.

“Growing policy uncertainty is beginning to weigh on business and consumer sentiment, with more substantial impacts from federal layoffs and funding disruptions expected in the months ahead.”

Despite ETI’s indications, recent data from the Bureau of Labor Statistics signaled a stronger job market, with the U.S. economy adding 151,000 new jobs in February, up from 125,000 jobs in the previous month.

Health care was the top employment creator, followed by financial activities, transportation and warehousing, and social assistance.

The White House said the jobs report was proof that U.S. manufacturing “is on the rebound thanks to President Donald J. Trump and his administration.”

“The country gained 10,000 manufacturing jobs in President Trump’s first full month in office—a swift turnaround after losing an average of 9,000 manufacturing jobs per month, or 111,000 total, in the final year of the Biden administration.”

The automobile sector led among manufacturing jobs, adding 8,900 new positions. Karoline Leavitt, White House press secretary, said this was the “most auto jobs added in 15 months.”

“The private sector is leading the way—93 percent of the job gains in February were in the private sector. This is great news for American workers and families. The Trump administration will continue to work hard to implement pro-growth policies and push Congress to enact the Trump economic agenda.”

Barnes said the ETI is signaling “potential early-warning signs of wavering conditions.” While the U.S. job market “remains healthy overall,” there are risks of hiring slowing down, he said.

“Uncertainty is likely to make employers more cautious and, if prolonged, could portend more pronounced labor market weakness in the coming months. Despite a resilient end to 2024, momentum in the U.S. labor market is clearly at risk of fading.”

Many businesses remain optimistic about economic conditions and hiring, according to a recent survey from Goldman Sachs.

The survey, which polled small businesses, found that optimism was “high” and growth plans “remain strong” among the majority of businesses, with 46 percent of respondents expecting to create new jobs this year.

However, many small businesses that are currently hiring said they were finding it difficult to find qualified workers, blaming the situation on the inability to compete against the pay and benefits offered by bigger companies.

Impact on Interest Rates

Meanwhile, the February jobs report may dissuade further interest rate cuts from the U.S. Federal Reserve, according to a March 10 outlook report by J.P. Morgan.

“The Fed is likely to hold off on further decreases in interest rates in the near term as it assesses the strength of the U.S. economy within the backdrop of heightened fiscal policy uncertainty,” the report said. “Our strategists’ view also remains that the Fed will lower interest rates throughout the course of the year.”

The central bank intends to pay close attention to the Consumer Price Index (CPI) report set to be released this week: “CPI is a key inflation measure, which the Fed will use to monitor inflation’s progress towards its 2 percent goal.”

The Fed said in December that it expects fewer cuts this year due to concerns about inflation.

Last month, Fed chair Jerome Powell confirmed this stance to Congress, saying that neither he nor his colleagues are in a hurry to bring down interest rates. Last year, the central bank cut down rates three times.

“With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” he said.

“We know that reducing policy restraint too fast or too much could hinder progress on inflation. At the same time, reducing policy restraint too slowly or too little could unduly weaken economic activity and employment.”

The next meeting of the policy-making Federal Open Market Committee is scheduled for March 18–19.