February jobs report: ‘This is an incredibly resilient labor market,’ analyst says

Indeed Hiring Lab Research Director Nick Bunker joins Yahoo Finance Live to discuss the January jobs report, the state of the labor market, ongoing tech layoffs, and the outlook for U.S. labor.

Video transcript

JARED BLIKRE: Well, let's stick with the jobs theme. A strong February jobs report worrying more than just the Treasury Secretary, as employers try to navigate a changing jobs landscape. Here with some insight into the jobs market, Nick Bunker, research director at the Indeed Hiring Lab. Nick, glad you could be with us today. Your first blush, I guess, take on the jobs report this morning, as we've been talking about throughout our live shows today. Something in there for everybody, both the bulls and the bears, the hawks and the doves. What's your big takeaway?

NICK BUNKER: So I think there's two main three lines for me. One is that this is an incredibly resilient labor market and one that's adding jobs at a really, really strong pace. But at the same time, there are some signs that we're on a path toward a more sustainable, but strong pace of growth. The labor force participation rate, particularly for prime age workers, picked up and now is back at where we were in early 2020. And there are signs that wage gains continue to moderate. So demand is still strong, joblessness is low, and it looks like we are on a path towards getting to something that's more sustainable, but the question is how long are we going to take to walk down that path?

JARED BLIKRE: Yeah, and we saw it's been a really big week in the Treasury market. We saw Jay Powell get hawkish in front of Congress. And now it looks like this latest report because there is some weakness, despite the overall strength. Some people are saying this gives the Fed the cover to only raise by 25 basis points. By the way, that was exactly what people were expecting on Tuesday morning before Powell came in. What do you think happens with the Fed in a week?

NICK BUNKER: So I think if you look at this jobs report, there are some encouraging signs within the Fed's framework that there is moderating wage growth, which Chair Powell in the past has really sort of mentioned as the best barometer of the labor market. I think really the question is, does the Fed take some solace from signs that realized wage growth is ticking down, or does it start to continue to be concerned by the high level of payroll gains and the low level of unemployment? So I do think it matters sort of where the points of emphasis are there, though whether or not we get 25 or 50 basis points the next meeting, I think there's clearly a hawkish tilt towards the Fed's commentary.

JARED BLIKRE: All right, I want to get to another labor report that came out recently. That would be the JOLTS report, job openings, layoffs, turnovers. Just want to get your take here-- I'm reading through your notes. The quitting, the data on quitting is the most suggestive of a moderating labor market. Wondering if this morning's news on the payroll numbers from the BLS change your thinking on that, or where are you there?

NICK BUNKER: Yeah, so I think the data we got today is in line with that. I think there's a pretty strong relationship between the rate at which people are quitting their jobs or voluntarily leaving their old jobs, most likely to head to new ones, and wage gains. And in both of those metrics, we are starting to see signs of moderation, even if they're both still elevated compared to their pre-pandemic level.

So if we continue to see workers quit their jobs at lower rates, that would suggest that wage growth has some ways to go down. But at the same time, it's still probably at a pace higher than what we saw before the pandemic. So I think, broadly, my view of the market continues to be the same, that there's lots of strength, even if there's been moderation over the past several months.

JARED BLIKRE: And as typical in this stage of the business cycle, we're seeing goods-- and I'm still talking about the labor market in the BLS report this morning. We're seeing goods producing industries shed jobs, the service industry still rolling strong here. Just roll out some statistics-- let me get to the leisure and hospitality. They added 105,000 jobs. You can see that second to the left there. Retail up 50,000. Even construction, which usually leads jobs during downturns, that's up 24,000. That's not a service job. What do you make of some of the detail in these various industries here?

NICK BUNKER: So I think one thing, like you just said, the fact that construction continues to add jobs is not only surprising, given the recessionary concerns, but really a sort of surprising source of strength, given what's happened to mortgage rates over the past year or so, which I think suggests that there's a continued backlog of construction, be it both in the residential space, but also potentially with a lot of the infrastructure comp spending that's coming online that continues to power demand for workers in that sector.

And you just mentioned the leisure and hospitality numbers. That's been a real continued source of strength for the labor market. And as that sector continues to rebound from that big, massive shock from the beginning of the pandemic, as workers return to that sector and employment wraps up, that's one reason why we continue to see strong headline gains in the overall US labor market.

JARED BLIKRE: And we got time for another one here. Just want to get-- let me give you the floor. As you're going through talking to clients about the labor market, any kind of pockets of strength or weaknesses that are really standing out to you? We've seen all these tech layoffs. They haven't necessarily shown up in the aggregate statistics. I'm just wondering where you're seeing that fall.

NICK BUNKER: Yeah, so I think what we can see in the data is, it's very clear that demand for a lot of the jobs associated with technology firms are really pulling back. Software development jobs on a year over year basis, the number of job postings there is down close to 40%. So clearly, there's been a dramatic pullback in that sector of the labor market.

But as you said, we really can't see even these announced layoffs show up necessarily in the aggregate statistics. I think that's a good reminder, a good indicator that the tech sector is a big part of our discussion about the economy, a big part of financial markets. But it's not a huge share of employment. In fact, it's quite small. So I think there's clearly some sectors going through periods of pain and retrenchment right now, notably the tech sector, but that's not indicative of what we're seeing in the overall US market.

JARED BLIKRE: And finally-- by the way, I lied a minute ago. We have time for two more-- or had time for two more. This is the last one. SVB Bank really in sights this morning because the shares are halted. They're looking for a buyer of the bank. It looks like FDIC most likely involved. And this is a specialty bank that really serves the California VC economy and kind of melds with the discussion we were just having via the tech market that is very specialized. And we're not really seeing contagion overall in the market yet. But just wondering what your overall impression is, as it pertains to SVB this morning.

NICK BUNKER: Yeah, so I think I will fully admit that this is not something I track very closely. But the hope is that it's contained. And I will definitely be tracking the news myself, just to see hopefully this [INAUDIBLE].

JARED BLIKRE: All right. Don't mean to put you on the spot there, but appreciate all your insights this morning. Nick Bunker, research director at the Indeed Hiring Lab, thank you.