Global employment falls, developed world job losses highest since July 2020

A combination of slower demand growth and reduced optimism about the future has led companies worldwide to reduce their headcounts for the first time in three months in February, according to S&P Global Market Intelligence's Purchasing Managers' Index surveys. Job losses are concentrated in the developed world, where payrolls have been cut to the greatest extent since the pandemic downturn in 2020.

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Global demand growth slows, confidence wanes

The headline JPMorgan Global Composite Purchasing Managers Index (PMI) Output Index, covering manufacturing and services in over 40 economies, has fallen to 51.5 in February from 51.8 in January, reaching its lowest since December 2023. Historical comparisons indicate that the PMI aligns with the global economy growing at an annualized rate of 2.2%, down from an estimated 3.0% rate in the fourth quarter of last year.

In February, global new business has grown at the slowest rate since last September, rising modestly to register the second-smallest increase in demand for goods and services in over a year. Backlogs of work — a key indicator of future output requirements — have risen globally to the smallest extent recorded since December 2023.

Completing a trio of weaker forward-looking indicators is a fall in the survey's future output expectations gauge, which captures business sentiment about the next 12 months rather than tracking actual changes in various metrics compared to the prior month.

The global PMI's future output expectations index has fallen to its lowest since September 2024, dropping further below the survey’s long-run average in February.

Besides September 2024, weaker global sentiment has not been seen since 2022.

Global business optimism slides on heightened uncertainty

Resilient manufacturing sentiment in February, aided by the postponement of US tariff implementation, contrasts with a marked weakening of confidence in the global services economy. Businesses have grown concerned over geopolitical and economic stability and the potential for financial conditions to loosen less than anticipated, partly due to the possibility of higher inflation and interest rates.

The degree to which "uncertainty" is dampening demand and business optimism is now at its highest since December 2022, reaching a level not seen by the PMIs in the 15-year data history before the pandemic.

Among major developed economies, the highest degree of sentiment relative to long-run trends is recorded in Japan, where the weak yen has buoyed exports, but even here sentiment has fallen below its long-run trend. Sentiment has also fallen in the US to its second-lowest since 2023 amid declines in both manufacturing and services, and in Canada to its lowest since May 2020. Eurozone sentiment dipped slightly, and UK confidence improved marginally, though in both cases, sentiment levels are subdued by historical standards.

The highest level of confidence among major emerging markets relative to long-run averages is seen in Russia, followed by India, although moderating slightly in both cases. While sentiment remains low in mainland China, below its long-run average, it has risen to the second-highest in ten months amid improved perceived prospects in both manufacturing and services.

Global employment falls

The combination of weakening output and order book growth, alongside slumping sentiment, has caused global employment to decline marginally for the first time in three months in February. Losses are focused on manufacturing, though service sector payrolls have failed to grow in February for the first time in six months.

While emerging market employment has risen at the fastest rate in seven months, developed world jobs have been cut at a pace not seen since July 2020. Besides the early pandemic months, the PMI employment index for the developed world has not been this low since February 2010, reflecting accelerating job shedding in both manufacturing and services.

Job trends worsen across major developed markets, contrast record gains in India

Employment trends have worsened across major developed economies in February, although Japan's rate of job creation has merely cooled.

After buoyant business optimism drove job creation sharply higher in the US at the start of the year, February has seen a payback as jobs have been cut on average for the first time in three months. Job cuts have also deepened in Canada, reaching the highest since the early days of the pandemic, and spiked higher again in the UK amid higher payroll tax. Only modest job losses have been seen in the eurozone.

The hiring picture is brighter in major emerging markets. Job creation in India has remained close to January's all-time high and has accelerated in both Brazil and Russia. While job losses continue to be recorded in mainland China, the decline is only marginal and the smallest recorded since last September.

Purchasing Managers' Index data is compiled by S&P Global for more than 40 economies worldwide. The monthly data is derived from surveys of senior executives at private sector companies and is available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and subindexes, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data is used by financial and corporate professionals to better understand where economies and markets are headed and to uncover opportunities.

Data and insights for this article were compiled by Chris Williamson, chief business economist for S&P Global Market Intelligence.