March 10, 2023

Payroll employment climbed by 311 thousand in February after having jumped by 504 thousand in January and 239 thousand in December.  In the past three months the average increase has been 351 thousand.  At the beginning of last year we were routinely seeing employment gains of  550-600 thousand per month.  Thus, the labor market has clearly softened from where it was at that time, but the reality is that it has held up well in the face of sharp increases in interest rates and a significant drop-off in stock prices.

In addition to hiring people, businesses can also alter the hours of existing employees.  The nonfarm workweek declined 0.1 hour in February to 34.5 hours after having gained 0.2 hour in January. It had been declining slowly from where it was at the beginning of last year but it appears to have leveled off.  Keep in mind that prior to the recession the workweek was 34.4 hours so at 34.5 hours currently it is hardly indicative of economic weakness.

While employment continues to climb, jobs are still not getting filled.  Job openings have fallen slightly from a record high level of 11.7 million to 10.8 million but firms continue to be unable to fill open positions.

The changes in  employment and hours worked are reflected in the aggregate hours index which  declined 0.1% in February to 115.1 after having surged  by 0.9% in January.  This index  appears on track to rise at a robust 3.1% pace in the first quarter.

The demand side of the economy has softened slightly but not enough to cause workers to start laying off bodies.

Jobs in the leisure and hospitality industries increased  105 thousand in February to 16,500 thousand after climbing by 114 thousand in January.  Employment in this sector is still about 400 thousand workers below its February 2020 pre-recession level.  The reality is that many pre-pandemic hospitality workers have chosen to seek employment in other industries.

Elsewhere, manufacturing employment fell by 4 thousand.  Construction employment rose by 24 thousand.   Retail trade jobs rose by 50 thousand.  Health care jobs gained 44 thousand.   Social assistance climbed by 19 thousand.  Info tech jobs fell 25 thousand.  Trade, transportation and utilities declined by 22 thousand.  Leisure and hospitality jobs rose 105 thousand.  Professional and business services climbed by 74 thousand.   Financial sector jobs shrank by 1 thousand.  Government jobs rose by 46 thousand.

Given these steady employment gains we expect GDP growth of 2.0% in the first quarter and 1.5% in 2023.

Stephen Slifer


Charleston, S.C.