This morning, the March nonfarm payrolls report topped expectations as the economy added 215,000 jobs, versus economists’ target of 205,000.
The report will be hailed as another win for the U.S. economy, as job growth above 200,000 is considered solid. Beating Wall Street’s expectations was just icing on the cake. And so, analysts and investors alike will take this report and run with it as they have so many others.
But a different report released earlier this week offers a foreboding look at why job growth will likely soon fade, and why you can expect low interest rates for quite some time.
On Thursday, we received the latest report on U.S. job cuts from Challenger, Gray & Christmas — a staffing company that compiles layoff announcements each month.
According to Challenger’s report, March job cuts declined 21% from February, marking the lowest monthly total since December.
While the data was positive on the surface, a little digging reveals the real picture. In fact, March layoffs were 31% higher than the same month a year ago, making it the fourth consecutive year-over-year increase. For the first quarter, employers announced a total of 184,920 job cuts, a 31.8% increase from the first quarter of 2015.
As you can see, the Challenger layoff data stands in sharp contrast to this morning’s March jobs report. There’s no way to sugarcoat the layoff data though — people are losing their jobs at an alarming rate.
With oil prices plunging over the past year, layoffs in the energy sector are understandable. But job cuts are now spilling over into the rest of our economy. Layoff announcements are ramping up in consumer-driven sectors like retail and economy-driven sectors like banking.
This job erosion should concern you, but it is even more disconcerting to Federal Reserve Chair Janet Yellen. Let me explain.
Looking Forward, Not Back
Layoff announcements are a data point I follow often, and have written about before. A key characteristic that I think is helpful to remember is that layoff data is a forward-looking indicator, one that tells us what companies expect to do over the next year or so. This morning’s March payroll data, on the other hand, is a lagging indicator, telling us what these companies have already done.
