Plenty of fuel for inflation. Powell is not going to like this.
By Wolf Richter for WOLF STREET.
Employment in the relatively small tech and social media sector is getting hammered by hiring freezes and layoffs, and this is in the headlines every day, though these are global layoffs and only a portion take place in the US, when they become reality sometimes months after the announcements.
And we can see it starting to crop up in the employment data that was released today, as the unemployment rate in the “Information” sector, where some of the tech and social media companies are included, spiked in January, and the number of employees in that sector dropped for the second month in a row.
But in the overall vast US economy, the rest of the labor market remains hot, though not quite as hot as it was, according to the employment report today, after having been confirmed month after month by other data on the labor market from other sources, from job openings and actual layoffs and discharges to applications for unemployment insurance: rising number of jobs, longer work-weeks, and rising wages.
“Biggest ever” seasonal adjustments for the biggest ever workforce.
As every time when a strong employment report is released, the nitpicking starts, in order to show why this is in fact a terrible report, month after month the same thing, and they’re poking through all kinds of stuff to prove their point, such as today for January’s jobs report, blaming the “biggest seasonal adjustments ever” for the strength of the data.
Well yeah, employment is very seasonal, with huge hiring of seasonal workers before the holidays and before summer, followed by a big reduction in this seasonal workforce. This occurs predictably every year, and big seasonal adjustments are used to iron out the seasonal fluctuations.
And for this January, sure the seasonal adjustments were “the biggest ever” – because the economy is the biggest ever and the number of people with jobs is the biggest ever, and seasonal adjustments move in tandem.
But the “Information” sector is starting to get hammered.
“Information” is a small sector, with a little over 3 million employees, or roughly 2% of US workers. Not all tech and social media companies are in the Information sector. Some are in Professional and Business Services, others are in manufacturing, etc. But “Information” does capture some of the companies that are generally considered in tech and social media.
Information includes: software publishing, traditional publishing, publishing exclusively on the Internet; motion picture and sound recording industries; broadcasting industries, including over the Internet; telecommunications industries; Web search portals, data processing industries, and the information services industries.
We saw a couple of days ago that job openings in Information collapsed by half, the worst drop since the Dotcom Bust. That was for December, and it was a function of the hiring freezes.
The actual layoffs are cropping up in today’s data by the Bureau of Labor Statistics – amid an otherwise rocking and rolling job market.
The number of employees in the Information sector fell by 5,000 for the second month in a row, for a total of 10,000 jobs that vanished in two months, the first declines since October 2020, the biggest declines since June 2020, the first back-to-back declines since April and May 2020.
So this is just the beginning, and compared to the huge hiring binge over the past two years it’s just a dip, but that’s how it starts:
The unemployment rate for people looking for jobs in the information sector spiked to 3.9% in January, the highest since January 2022, when it was coming down from much higher unemployment rates during the pandemic. And this is also just the beginning:
Overall Labor Market Still Rocking & Rolling.
The number of workers, including self-employed, jumped by 894,000 in January, the second big jump in a row, to a record 160.1 million, seasonally adjusted. This is reported by households.
For the past three months combined, the total number of workers soared by 1.54 million. But it remains well below pre-pandemic trend (green line):
The number of employees on regular payrolls jumped by 517,000 in January, and by 1.07 million over the past three months, to a record 155.0 million employees, according to the survey of employers. But the number of employees still remains below pre-pandemic trend:
The labor force jumped by 866,000 people in January, and by 1.19 million over the past three months, to a record 165.8 million. These are people who either have jobs or are actively looking for jobs. It is a measure of the supply of labor. Despite the big increase in January, it remains well below pre-pandemic trend, which is why the labor market is tight – though it’s getting a little less tight:
The labor force participation rate is another sign the labor market is tight, and it has improved very little over the past year. In January, it rose to 62.4%, same as in March 2022.
The number of unemployed and actively looking for a job dipped to a 20-year low of 5.69 million. There are always a lot of people – around 6 million even during the best of times – who don’t have a job and who want to work, and who actively looked for work during the survey period. They constitute part of the supply of labor and part of the churn in the labor market. And they’re another sign that the overall labor market refuses to roll over – despite the layoffs in tech and social media after two years of over-hiring and over-paying:
Average hourly earnings of production and nonsupervisory employees – engineers, teachers, bartenders, technicians, drivers, retail workers, etc. who do not manage other people – rose by just 0.25% in January from December, and were up 5.1% from a year ago, the smallest increases since early and mid-2021, but still hefty increases.
But the average weekly earnings of production and nonsupervisory employees, powered by an increase in weekly hours worked, jumped by 0.8% in January from December, the biggest month to month increase since February 2022.
Year-over-year, average weekly earnings of production and nonsupervisory employees jumped by 5.4%, the biggest increase since August – another sign that this labor market refuses to roll over.
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