ROI-U.S. jobs market stuck in 'unusual and uncomfortable' stasis: McGeever

​The Job Openings and Labor Turnover Survey, or JOLTS, data this week showed hiring in March rose at the fastest pace in nearly six years.

The latest U.S. jobs data on Friday comes against ​a backdrop of historically low unemployment, record high stock markets, and an unprecedented investment boom in artificial intelligence. So ​why can't policymakers relax a bit? On the surface, there are reasons to be ‌cheerful. ​The Job Openings and Labor Turnover Survey, or JOLTS, data this week showed hiring in March rose at the fastest pace in nearly six years. Initial weekly claims for unemployment benefits are the lowest since 1969, and the 4.3% unemployment rate is consistent with an economy boasting full employment. While the consensus forecast for April non-farm payroll gains in a Reuters poll ‌of economists is only 62,000, around a third of the 178,000 increase registered in March, economists also expect the unemployment rate to remain unchanged at 4.3%.

But this stability could be a mirage. The labor market is stuck in a "low hire, low fire" zone, or perhaps we should say "no hire, no fire". Net hiring has virtually ground to a halt, and the only reason the unemployment rate isn't rising is because the number of people looking for work has shrunk, largely thanks to the Trump administration's ‌tough immigration policies. As outgoing Federal Reserve Chair Jerome Powell said last week, it is "an unusual and uncomfortable kind of a balance." Recent Fed studies have shown that the so-called 'breakeven' level of job growth required to keep the unemployment rate steady ‌is close to zero. Indeed, we could see some months with payroll declines of up to 100,000 this year – and that's with the economy growing at a healthy clip. Amid all this is the lingering threat of AI. While policymakers have championed the technology's potential productivity benefits, they have also raised concerns about the threat it poses to jobs. If AI lives up to the hype and overtakes an ever-expanding array of functions, fewer workers will be needed, leading to a possible "fire, no hire" environment.

JOBPOCALYPSE VS JEVONS Will tech-related layoffs show up in the April data? Perhaps. The reported 30,000 job losses at Oracle in ⁠late March and ​the 8,000 cuts at Meta may be counted. However, real-time data ⁠tracked by website layoffs.fyi suggests tech sector layoffs aren't accelerating. A few unusually large layoffs in March inflated the first quarter total, but layoffs in April were much more in line with recent norms, these figures show.

No matter what April jobs figures reveal, there's a case to make that worries over ⁠the impending AI 'jobpocalypse' are wildly overdone. Consider 'Jevons paradox', the theory named after 19th-century economist William Stanley Jevons. He argued that when a resource becomes more efficient to use - in this case labor - demand for it goes up, not down, because it is cheaper. Frank Flight, strategist at Citadel Securities, ​notes this has been the case for over a century. The global economy has absorbed electrification, mass production, mechanization, industrial robotics, personal computing, the internet, and smartphones "without derailing long-run growth or making human labor obsolete," he notes.

"The reality ⁠is that there is very little evidence of labor displacement at scale in the economic data thus far, and actually where we do see evidence of the impact of AI, it looks more consistent with our view that AI is a complement rather than a substitute for labor," Flight wrote recently. He notes ⁠that ​hiring in four of the five occupations most exposed to AI has risen since May last year. Job postings in software engineering and accountancy are up 18%, with a 9% rise in customer services, and banking and finance. Demand for workers in the legal profession has fallen 4%, but that's in line with overall job postings.

Torsten Slok at Apollo Global Management agrees. He notes that Jevons paradox was originally applied to the coal industry in the 1860s. Steam engines made coal more ⁠efficient, but Britain burned more, not less coal. The same pattern is happening today across a range of service industries, he argues. "The bottom line is that cheaper inputs don't shrink industries. Instead, AI is going to increase both productivity and ⁠employment," Slok argues.

He and other AI optimists may ultimately be ⁠proven right - though this won't be clear for many years. In the meantime, there are a few payrolls reports for investors and policymakers to digest - starting on Friday.

(The opinions expressed here are those of the author, a columnist for Reuters; Editing by Chizu Nomiyama) Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. Follow ROI ‌on LinkedIn, and X.

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