As US unemployment rate has risen from a low of 3.4% in 2023 to 4.1% today, the Sahm rule sounds a recession alarm. BUT Covid has artificially depressed the unemployment rate and the layoff rate remains very low. The unemployment rate has risen b/c net job growth did not keep up… pic.twitter.com/repFRps8me
— Holger Zschaepitz (@Schuldensuehner) July 29, 2024
Job openings in the U.S. fell slightly to 8.184 million by the end of June, according to the Labor Department’s Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS). This minor dip suggests that the American labor market is starting to cool under the pressure of high interest rates. Despite these declines, the U.S. economy and job market have remained resilient, even with the Federal Reserve’s aggressive measures to control inflation.
Job openings peaked at 12.2 million but have been decreasing steadily.
Global News | ADP US July private employment rises 122,000 vs est +150k: Agencies#jobs @ADP pic.twitter.com/LkDcrtGXIX
— ET NOW (@ETNOWlive) July 31, 2024
Nonetheless, 8.2 million job openings is still considered a robust figure, especially since monthly job openings had never exceeded 8 million before 2021. The Federal Reserve views a reduction in job openings as a relatively painless method to temper a heated job market and reduce the pressure on companies to raise wages, potentially feeding into inflation.
The Labor Department is set to release July numbers on job creation and unemployment on Friday.
Global News | Latest news from the US on consumer confidence and job openings👇#UnitedStates #jobs pic.twitter.com/5G3WCYP6gc
— ET NOW (@ETNOWlive) July 30, 2024
According to FactSet, a data firm, forecasters predict the economy likely created 175,000 jobs in July, down from 206,000 in June. The unemployment rate is expected to remain at a low 4.1%.
The Federal Reserve is widely expected to leave interest rates unchanged at its meeting this week but might consider cutting them in September. The number of available jobs in the United States is slowly disappearing, and hiring has screeched to its slowest pace in a decade, aside from the pandemic plunge. This trend is making more workers hold tight to the jobs they already have.
The good news is that these jobs don’t appear to be nearing the chopping block. In June, employers posted an estimated 8.18 million jobs. While this was slightly more than economists expected, it represented a modest step back.
Us labor market cooling slightly
This is also the second-lowest monthly total seen so far this year. It puts the ratio of job openings to job seekers at 1.24, or slightly above the average seen in 2019, according to Bureau of Labor Statistics (BLS) data.
The 5.34 million estimated hires in June and the hires rate (number of hires as a percentage of employment) were the lowest since April 2020, when the job market collapsed at the start of the pandemic. Outside the pandemic period, the hires rate hasn’t been this low since February 2014. Economists closely watch the quits rate — the number of people voluntarily leaving their jobs as a percentage of total employment — as it signals workers’ willingness to test the labor market.
In June, the quits rate held at 2.1%, the lowest since June 2020. However, the number of estimated quits dropped to 3.282 million from 3.403 million, landing at the lowest monthly total since November 2020. One bright spot for workers and the overall health of the labor market: layoffs plummeted in June to an estimated 1.498 million, the lowest since November 2022.
Overall layoff activity is well below pre-pandemic levels. The low level of layoffs indicates that employers are being cautious and that there is pent-up demand to resume hiring. The most likely catalyst could be when the Federal Reserve finally starts a rate cut cycle.
After launching one of the most aggressive monetary-tightening campaigns starting in March 2022, the U.S. central bank has been waiting for inflation to show a sustained trajectory of slowing. The Fed will announce its latest interest rate decision Wednesday, which is widely expected to be a pause. Markets are projecting that the rate cut may come soon.
Many economists have recently suggested that the central bank should begin cutting interest rates before signs of cooling in the labor market intensify. However, this is not expected to be the outcome of the ongoing central bank meeting.
