US labor market is slowing, but not yet a ‘three-alarm fire’: Economist

However, several indicators point to “slowing momentum” in the labor market, said Ernie Tedeschi, director of economics at the Yale Budget Lab and former chief economist of the White House Council of Economic Advisers under the Biden administration.

The current level of job growth and unemployment “would be good for the sustained U.S. economy for several months,” he said. “The problem is that other data doesn’t give us confidence that we’re going to stay there.”

For example, the average job gain was 116,000 over the past three months; the three-month average was 211,000 a year ago. The unemployment rate also rose steadily from 3.4% in April 2023.

Employers are also hiring at their slowest pace since 2014, according to separate Labor Department data released earlier this week.

Hiring was also not broad-based: Private sector job growth outside of health care and social care was “unusually slow,” averaging about 39,000 over the past three months, compared with 79,000 over the past year, and 137,000 over. 2015 to 2019, according to Julia Pollak, chief economist at ZipRecruiter.

Workers are also quitting at the lowest rate since 2018, while job openings are at their lowest level since January 2021. Quitting is a barometer of workers’ confidence in their ability to find a job. new job.

“Once we start seeing layoffs, it’s game over and we’re in a recession,” Tedeschi said. “And that didn’t happen at all.”

That said, the job search has become more difficult for job seekers than in the recent past, according to Bunker.

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 can encourage consumers to buy houses and cars, and businesses to make more investments and hire more workers as a result, for example.

That reduction likely wouldn’t be instantaneous, but would likely take many months to trickle through the economy, economists said.

Overall, however, the current picture is “still consistent with an economy facing a soft landing rather than falling into recession,” Paul Ashworth, chief North America economist at Capital Economics, wrote in a note on Friday.