The Jobs Report Signals a Labor Market Deceleration
The Jobs Report Signals a Labor Market Deceleration
There are two main takeaways from today’s Jobs Report. The first is that the labor market has cooled off significantly. The second is that leading indicators in the report and from other sources signal further cooling ahead.
Signs that the labor market has cooled
The most important figure in today’s Jobs Report was the unemployment rate, which ticked upwards to 4.1%, the highest rate since November, 2021. It ends the 30-month stretch of unemployment at or below 4% and suggests that the labor market is slackening. The expanded U6 measure of unemployment, which includes workers who are only marginally attached to the labor force, or who are working part-time because they can’t find full-time jobs, also inched upwards to 7.7%.
As of May, the number of long-term unemployed Americans (those unemployed for 27 weeks or more) had averaged 1.265 million, around the same as the 2019 average of 1.267 million. In June’s report, however, it rose to 1.516 million.
While payrolls slightly exceeded economists’ expectations, coming in at 206K, totals for the prior two months were revised downwards by a combined 111K, and June job growth was relatively weak outside of the government and healthcare sectors. The government has now added about 600K payrolls over the past year, mostly at the local level—both a sign of election year hiring in schools and law enforcement, and of a deterioration in the private sector which is making it easier for government agencies to compete for talent.
Wage growth slowed to 0.3% over the month and 3.9% over the year, further evidence that demand for workers may be cooling. The workweek held steady at 34.3 hours, on average—right at the bottom end of the range typically seen in a healthy labor market—but the workweek for production and nonsupervisory employees edged downwards to 33.7 hours.
Signs that the labor market could cool further
Temporary help services employment, often seen as a leading indicator, fell by 48.9K. Earlier in this economic cycle, the declines indicated a normalizing labor market, where employers were shifting from an overreliance on temp workers back to shoring up their in-house staff. Now, however, the losses are accelerating even though the number of temp workers is already well below its prepandemic level.
Outside the labor market, there were further signals of future weakening. For example, online job postings have slid for the past four weeks, according to ZipRecruiter data. Leisure & hospitality openings and hires fell in the latest JOLTS report, which could be a sign that businesses anticipate consumer spending pulling back.
The industrial side of the economy has been weak for months, but June’s ISM Services Purchasing Managers Index (PMIs) dipped into contraction territory, with new orders particularly weak. New orders are typically correlated with future activity.
Take a tour through the Jobs report in ZipRecruiter charts.
