Job market renews slowdown in February

San José, CA – Cracks in economy began to show up as Silicon Valley Bank, based in Santa Clara, California, just north of San José, was shut down on Friday, March 10. The bank was the 18th largest bank in the United States, and mainly served high-tech startups, venture capitalists and wealthy individuals.

The recent slowdown in Silicon Valley and interest rate hikes by the U.S. central bank, the Federal Reserve, undid the bank. A run on the bank developed, as depositors pulled their money out of the bank. The bank was forced to sell U.S. government bonds at a loss because of higher interest rates and tried to raise more money or sell itself. When this failed, the bank was shut down by California regulators and control handed over the Federal Deposit Insurance Corporation. or FDIC.

This bank failure is the largest since 2008 when Washington Mutual was taken over by J.P. Morgan Chase during the financial crisis. The failure of Silicon Valley Bank followed the announcement by Silvergate on Wednesday that it would be winding down because of losses in cryptocurrency markets. These two bank failures in one week shook Wall Street, extending the selloff in stocks and sending Bitcoin back below $20,000.

Another sign of a slowdown came on Thursday, March 9 when the Department of Labor reported that new claims unemployment insurance rose more than 20%, to 211,00 for the week ending March 4. While the total number is relatively low, this is the biggest increase in new application in eight months.

The Labor Department’s report on jobs and unemployment released the next day also showed a slower job market. 311,000 net new jobs were created in February, a good pace but far lower than the more than 500,000 new jobs in January. Industries hit hardest by the 2020 pandemic were still in recovery mode, led by gains in the leisure and hospitality. But the announced job cuts by tech firms and falling online sales caused losses in information, transportation and warehouse jobs. The slowdown broadened across industries, as the percent of industries showing job losses grew from 32% in January to 44% in February.

The unemployment rate in February ticked up by two tenths of one percent from the record low in January, coming in at 3.6%. But while the unemployment rate for white Americans only rose at 0.1%, jobless rates of oppressed nationalities all increased much more, with the highest increase among Latinos, whose unemployment rose 0.8% to a total of 5.3%.

The unemployment rate for teenagers (16-19 years old) and those who had not graduated from high school saw their unemployment rates rise by 0.8% and 1.1%, respectively. A big surge in the number of people unemployed for less than five weeks increased 17.5% to 2.3 million, showing that job loss were driving the rising unemployment rates

Average hourly wages were up 0.2%, but average hours of work per week fell by 0.3%, meaning that average weekly earnings fell in February. But these were money wages, while purchasing power fell even more because of continuing inflation.