The key to figuring out the labor market might be your office temp

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Apr 07, 2023 View in browser   By Sam Sutton Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. If you want to know where the labor market is headed, check the temps. “Traditionally, temporary help services has been a leading indicator of employment changes,” Erica Groshen, a senior economics adviser at Cornell University and former Bureau of Labor Statistics commissioner, told MM. The reason is almost as obvious as Michael Scott’s fascination with Ryan. When businesses are growing, they’ll hire temporary workers to fill roles that could eventually become permanent positions. The opposite occurs when they contract. And there have been signs of softening demand for temporary workers in recent months, Groshen said. “It has a history of being the canary in the coal mine,” she added. Federal Reserve officials led by Chair Jerome Powell are looking for any indication that an intense sequence of rate hikes might finally cool the otherwise scalding labor market, which they say is a driver of stubbornly high prices in the economy’s service sectors. This week’s tranche of data — which will be capped later this morning by BLS’s monthly jobs report — showed signs that might be starting to stabilize amid growing uncertainty over the economy. First — The Institute for Supply Management’s monthly survey on Monday found that more manufacturers are considering reducing the size of their workforce as demand fades. Second — BLS on Tuesday reported that the number of open jobs in the U.S. fell below 10 million for the first time since 2021 in February. While there are still more openings than available workers, the decline could be a balm to employers who have raised wages to compete for new hires. Third — New estimates from the Labor Department found that more Americans than previously thought have filed for unemployment benefits. If Friday’s report reflects a decline in the number of temporary workers, however, American Staffing Association CEO Richard Wahlquist cautioned that there’s usually a drop-off in the early months of the year. And while the ASA’s staffing index has reported a slowdown in recent months, it’s still much higher than usual through the first quarter. “We have seen a consistent slowing and some decreases over the last eight or nine weeks,” he said, though the association’s most recent readout suggested a slight uptick. “We're seeing it. However, the news is that we're still dealing with tight labor markets.” IT’S FRIDAY — The markets are closed for Good Friday, but our tip line is still open. What should we be thinking about heading into next week’s IMF-World Bank meetings? Send tips, suggestions and gossip to Sam at ssutton@politico.com and Zach at zwarmbrodt@politico.com.   GO INSIDE THE 2023 MILKEN INSTITUTE GLOBAL CONFERENCE: POLITICO is proud to partner with the Milken Institute to produce a special edition "Global Insider" newsletter featuring exclusive coverage, insider nuggets and unparalleled insights from the 2023 Global Conference, which will convene leaders in health, finance, politics, philanthropy and entertainment from April 30-May 3. This year’s theme, Advancing a Thriving World, will challenge and inspire attendees to lean into building an optimistic coalition capable of tackling the issues and inequities we collectively face. Don’t miss a thing — subscribe today for a front row seat.     Driving The Day More on the jobs report — BLS will release its March employment report at 8:30 a.m. Economists expect today’s report to show the economy added 238,000 jobs and that the unemployment rate will land at around 3.6 percent – still near historic lows. Young Kim’s dilemma — Our Eleanor Mueller: “California Republican Rep. Young Kim is a top target for Democrats as they plot a path for winning back the House. Her more immediate problem: Tackling global banking turmoil that originated in her home state. Kim, who flipped a Democratic-held House seat in 2020, has emerged as a key player in the banking tumult thanks to her new role on the House Financial Services Committee, where she serves as the only West Coast Republican. She joined the committee in January, after arguing for two years that the GOP needed someone like her to deliver a female and Asian American perspective as well as western representation.” DOWN TO THE WIRE — The WSJ’s Nick Timiraos: “Federal Reserve Chair Jerome Powell and his colleagues faced their closest call on interest rates in years. It wasn’t until the clock was ticking down two days before their scheduled decision last month that senior leaders settled on a plan to lift them by a quarter percentage point.” BANK FIGHT! — Bloomberg’s Laura Davison, Tatyana Monnay and Bill Allison: “US banks are pitted against each other as regulators move to strengthen oversight after a series of failures undermined confidence in the financial system.” — Case in point: Independent Community Bankers of America CEO Rebeca Romero Rainey slammed the American Bankers Association, which represents financial institutions of all sizes, after ABA CEO Rob Nichols told C-Span that his group hadn’t formalized a position on deposit insurance. TROUBLE AHEAD — Our Doug Palmer: “The head of the International Monetary Fund warned of increasing vulnerabilities to the global economy as the world’s largest central banks continue to tamp down on stubbornly high inflation.” In the markets Is that bad? — Credit conditions are deteriorating, according to the American Bankers Association’s quarterly survey of chief bank economists at major North American financial institutions. The ABA’s index, which projects conditions over the next six months, found that both business and consumer credit quality “will be challenged by heightened uncertainty and broader economic headwinds this year,” ABA Chief Economist Sayee Srinivasan said in a statement. As such: “lenders are responding with cautious and prudent underwriting.” Another worrying sign? More than 180 companies filed for bankruptcy during the first quarter, “more than any comparable period in the past 12 years,” writes Chris Hudgins for S&P Global Market Intelligence. Tough look — Bank of America had to cut short a client conference on geopolitics after some speakers appeared to take a pro-Russian stance on the Ukraine conflict. “ I still don’t get why US banks still wheel out speakers at events for clients who so often roll through Moscow’s talking points on the war in Ukraine,” Timothy Ash of BlueBay Asset Management told the FT. Among the highlights: “Daniel Sheehan, BofA Securities’ head of international relations, was critical of Ukrainian President Volodymyr Zelenskyy, describing him as “a master manipulator and mimic” about whom there were ‘serious concerns’ in the US administration.” IT AIN’T EASY — Bloomberg’s Scott Carpenter: “BlackRock Inc., the chosen seller of a pile of securities once held by failed banks, faces a dilemma between flooding the market and risking higher costs to hold the debt.” Jobs Report Henry Schulz is now special assistant at the Department of Commerce. He most recently was an intern in the office of presidential correspondence at the White House. — Daniel Lippman Mary Ellen Golcheski is joining the National Association of Insurance and Financial Advisors as a legislative liaison, and the association has promoted Michael Hedge and Maeghan Gale to senior directors and Cody Schoonover to PAC manager. — Daniel Lippman Howard Byck is joining the U.S. Chamber of Commerce Foundation as its first senior vice president of partnerships and head of development. He was most recently senior vice president of corporate and sports alliances at the American Cancer Society. — Daniel Lippman Crypto DeFi’s turn in the barrel — From Sam: “Treasury is recommending changes to anti-money laundering and terrorist financing rules to address gaps that allow criminal networks to use decentralized crypto platforms to fund their activity. The recommendation is contained in a new risk assessment report released by the department on Thursday, the first by Treasury to focus on illicit finance risks around DeFi.” While Treasury says many DeFi services are failing to adhere to anti-money laundering rules, it’s unclear if the groups behind those networks are able to do so. “DeFi protocols function in a different way than traditional finance, and trying to apply existing AML/CFT rules, isn’t going to accomplish AML/CFT objectives,” DeFi Education Fund policy director Miller Whitehouse-Levine told MM. Regulatory Corner TAXMAN COMETH — Our Benjamin Guggenheim: “The IRS released a much-anticipated report on Thursday outlining how it will spend new funding on ambitious hiring plans and increased enforcement aimed at wealthy taxpayers and big corporations — but left a long list of questions unanswered, which is bound to aggravate lawmakers.”   STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president’s ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.       Follow us on Twitter Mark McQuillian @mcqdc Ben White @morningmoneyben Victoria Guida @vtg2 Katy O'Donnell @katyodonnell_ Zachary Warmbrodt @Zachary Sam Sutton @samjsutton   Follow us

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