The Fed Is Getting the Recession It So Desperately Wants

First, I want to note that the Department of Labor has come to my way of thinking, and modified their seasonal adjustments, with the result that the March 30 initial claims number was revised up significantly, from 198,000 to 246,000. and this weeks initial unemployment claims "fell" to 228,000.

The number of Americans applying for jobless benefits has topped 200,000 for nine weeks in a row and looks worse than previously reported, based on a change in how the government adjusts for seasonal swings in employment.

The newly revised data suggest the labor market has softened more than it had appeared.

In the seven days ending April 1, new jobless claims totaled 228,000.

That’s down from a revised 246,000 in the prior week. However, two weeks ago, the government had estimated just 198,000 new claims for that week.

The large 48,000 upward revision for the week of March 25 is one of many such instances in the jobless-claims data going back several years.

………

The changes in the jobless-claims formula do not affect the monthly employment report that comes out Friday. The government uses a different process to adjust those figures, and that has already been updated.

Key details: The Bureau of Labor Statistics changed how it adjusts jobless claims for seasonal swings after the pandemic because of the large distortions that caused.

Now the government has adopted a somewhat different process to try to make the adjustments more accurate. As a result, many claims reports over the past several past years have been heavily revised.

“In my nearly 30 years of tracking these unemployment insurance data, I can never remember an annual seasonal factor revision like this,” said Stephen Stanley, chief economist of Santander U.S. Capital Markets.

(emphasis mine)

I think that the DoL is still trying to figure out how Covid is effecting the workforce, and given the rate of reinfection, and the rate of long Covid continuing to increase, this will likely be a moving target.

Meanwhile, the unemployment numbers for March show a slow-down in hiring, with 236,000 added to the non-farm payrolls, and the unemployment rate dropping by ⅒% to 3.5%.

The red-hot labor market cooled some in March, with hiring gains moderating and wage growth easing as more workers sought jobs.

Employers added 236,000 workers last month, a historically strong gain but the smallest in more than two years, the Labor Department said Friday. The unemployment rate ticked down to 3.5%.

More Americans jumped into the labor market in March, helping take pressure off wage increases. Average hourly earnings rose 4.2% last month from a year earlier, the smallest annual gain since mid-2021 when inflation was surging.

Steady hiring growth last month could keep the Federal Reserve on track to consider raising interest rates again at its meeting in early May. But slower wage gains could also allow officials to hint at a pause after that. Fed officials have signaled they will pay close attention to other measures of economic activity including bank lending conditions as they debate their next move.

Bond yields and stock futures rose after the jobs report. The stock market was closed for Good Friday, and bond and futures markets closed early.

The March jobs numbers add to others indicating the U.S. economy has slowed after showing surprising strength at the start of the year. Consumer spending—the primary driver of growth—also rose more modestly in February and still-high inflation ebbed.

As to inflation, there are indications that inflation is already down, and we are seeing the tail effects of earlier inflation:

Slowing wage growth during the first quarter could comfort Fed officials who have worried that strong earnings gains would fuel continued inflation above the central bank’s 2% target. The personal consumption-expenditures price index, the Fed’s preferred inflation gauge, rose 5% in February from a year earlier, down from a June 2022 peak of 7%.

Overall private-sector wage growth has been slowing broadly. Average hourly earnings on a three-month annualized basis returned to prepandemic levels, rising 3.2% in March and down from 4.9% in December.

Inflation is clearly coming down, and the Fed has already overshot, but they will continue.