Key insights
- US hiring rate fell to lockdown levels in February, signaling a significant labor market slowdown. Job openings decreased while layoffs remained low, indicating a 'no hiring' environment. The Iran war and rising energy prices add further uncertainty, increasing the risk of a downturn. This could pressure the Federal Reserve to maintain or cut interest rates to stimulate the economy, potentially impacting equity valuations.
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Getting a job in February was just as hard as it was in April 2020, when COVID-19 closures were in full swing.
The hiring rate—that is, the number of hires as a percentage of total employment—fell to 3.1% in February from 3.4% in January, the Bureau of Labor Statistics said Tuesday. That tied with the previous low in April 2020 and was only lower in 2010, when the economy was pulling out of the Great Recession.
The scarcity of new jobs is keeping the pressure off employers to raise salaries. This reduces worker spending power, but also helps keep inflation down.
There were 6.9 million job openings in February, down from an upwardly revised 7.2 million in January. That figure matched forecasters' expectations in a survey by Dow Jones Newswires and The Wall Street Journal. The number of layoffs remained at 1.7 million, close to historic lows, reinforcing the idea of a low-hiring, low-firing job market.
The report added detail to data the bureau released earlier, which showed the economy lost 92,000 jobs and the unemployment rate increased to 4.4% in February. Both were signs of a job market slowdown underway on the eve of the Iran war.
The war has added a fresh bout of uncertainty to a job market already shaken up by rapidly changing tariff policies, a crackdown on immigration, and the adoption of AI software, raising the chances of a serious downturn in the coming months.
"The hiring recession is weighing on millions of job seekers," Heather Long, chief economist at Navy Federal Credit Union, said in a commentary. "It would not take much to turn a 'no hiring' labor market into layoffs."
The outlook for hiring has not improved since Feb. 28, when the Iran war disrupted oil supplies, sending energy prices soaring.
"If the jobs market had stalled when the economy was looking in decent shape before the Middle East conflict got underway, an overlay of heightened geopolitical, economic and market angst is not going to incentivize business to suddenly start hiring now," James Knightley, chief international economist at ING, wrote in a commentary.
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