A “Now Hiring” sign is seen at a FedEx branch on Broadway on June 7, 2024 in New York City.
Michael M. Santiago | Getty Images
Why is there a “momentum slowdown”?
Employers added 142,000 jobs in August, fewer than expected, the Bureau of Labor Statistics reported Friday.
The good news: That’s up from 89,000 jobs added in July. The unemployment rate also fell slightly, to 4.2% from 4.3% in July.
However, many measures point to “slowing momentum” in the overall labor market, said Ernie Tedeschi, director of economics at Yale University’s Budget Lab and former chief economist of the White House Council of Economic Advisers under the Biden administration.
He said the current level of job growth and unemployment “will be good for the U.S. economy if it continues for several months. The problem is that other data does not give us confidence that we will stay at this level.”
For example, job growth has averaged 116,000 jobs over the past three months; the three-month average was 211,000 jobs a year ago. The unemployment rate has also been steadily rising, from 3.4% in April 2023.
Employers are hiring at the slowest pace since 2014, according to separate data from the Labor Department earlier this week.
Nor has hiring been broad-based: Private-sector job growth outside of health care and social assistance has been “unusually slow,” at about 39,000 jobs over the past three months versus 79,000 over the past year and 137,000 from 2015 to 2019, according to Julia Pollack, chief economist at ZipRecruiter.
Workers are also quitting their jobs at the lowest rate since 2018, while job openings are at their lowest since January 2021. Resignations are a measure of workers’ confidence in their ability to find a new job.
The job finding rate among unemployed workers is near 2017 levels and “continues to decline,” Bunker said.
“There is a very consistent picture that suggests the strong labor market momentum we saw in 2022 and 2023 has slowed significantly,” Tedeschi said.
He added that the data in general “is not necessarily worrisome or reaching recession levels yet. (But) it has become weaker. It may be a prelude to a recession.”
Why Layoff Data Is a Glimmer of Hope
However, economists said there was room for optimism.
Permanent layoffs — which have historically been a “herald of recessions” — haven’t really changed, Tedeschi said.
Federal data on unemployment insurance claims and layoff rates indicate that employers are holding on to their workers, for example.
Economists say the recent gradual rise in unemployment isn’t due in large part to layoffs. Instead, it’s due to a “good” reason: a large increase in the labor supply. In other words, more Americans have entered the labor market and are looking for work; they are counted as unemployed until they find one.
“Once we start seeing layoffs, the game is over and we are in a recession. That has never happened,” Tedeschi said.
However, the job search process has become more challenging for job seekers than in the recent past, according to Bunker.
Fed relief won't come quickly
US Federal Reserve officials are expected to begin cutting interest rates at their next meeting this month, which would ease pressure on the economy.
Lower borrowing costs may encourage consumers to buy homes and cars, for example, and prompt businesses to make more investments and hire more workers accordingly.
Economists said this relief would likely not be immediate, and could take months to spread through the economy.
But overall, the current picture “remains consistent with an economy experiencing a soft landing rather than sliding into recession,” Paul Ashworth, chief North America economist at Capital Economics, wrote in a note on Friday.
