By Kelly Evans
Call it the no-fire, no-hire job market.
That's how J.P. Morgan economist Michael Feroli describes it. And, in fact, the U.S. labor market has shown a marked improvement in the pace of layoffs lately.
The first quarter saw the lowest level of job cuts, as measured by consulting firm Challenger, Gray & Christmas, since 1995. Meanwhile, new weekly jobless claims are hovering near a 2½-year low.
But where are the new jobs?
The hope is that it is now finally starting to change.
On Friday, the Labor Department is expected to say the U.S. added 195,000 jobs in March, following a similarly strong gain the previous month. Recent improvement in surveys of business confidence and hiring plans, particularly among small business, also offer some encouragement.
Yet that is still on the low end of what is needed to keep the unemployment rate from drifting higher and to recoup the rest of the 8.7 million jobs lost during the recession. And it is partly why Friday's report is expected to show unemployment holding steady in March at a level of 8.9%.
The trouble is, the more sluggish the pace of hiring, the more likely it is that the temporary surge in unemployment becomes something more structural. Indeed, Barclays Capital reckons an unemployment rate of about 7%, not 5%, is close to full employment in the U.S. today.
Adding insult to injury, that also suggests there is less slack, or excess capacity, in the economy right now to keep inflationary pressures at bay.
Indeed, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota on Thursday said the central bank may have to raise its target lending rate to nearly 1% by year-end in response to higher core inflation rates. That may cheer inflation hawks, but it also suggests officials are losing faith in the economy's potential to create jobs for the 13.7 million unemployed. And that is no victory for the Fed.
