Employers are growing more cautious, pulling down some job postings and reining in hiring. Employees are sticking around more and not bouncing as readily for better opportunities.
Welcome to the wait-and-see job market.
Some of those holding patterns are being reflected in the federal jobs reports that have shown employment growth remaining historically strong but moderating to a mere shadow of the blockbuster gains seen in the early years of the pandemic economic recovery.
In October, US employers added a net 150,000 jobs, and the unemployment rate inched up to 3.9%, according to the Bureau of Labor Statistics.
A similar story likely played out last month but with an added boost from striking autoworkers and actors returning to the workforce (and BLS’ tallies).
Economists, by consensus, are expecting Friday’s jobs report, set for release at 8:30am ET, to show employment growth of 180,000 positions and for the jobless rate to hold steady at 3.9%, according to Refinitiv.
“We’re expecting to see moderate growth,” Karin Kimbrough, LinkedIn’s chief economist, told CNN in an interview. “And if our own data is any predictor, we’re actually thinking that it’s going to be a slightly underwhelming number.”
Workers back from strikes could boost numbers
If November’s job gains come in as expected, that rate of growth would be in line with what was seen during the decade before the pandemic. From 2010 to 2019, a period that included a record-setting 100 months of job growth, about 183,000 jobs were added per month on average.
Economists had anticipated 180,000 jobs last month as well, but the October total fell short of estimates by 30,000 jobs.
“Some of the weakness last month may have been illusory, just due to the strikes,” Julia Pollak, chief economist at online job site ZipRecruiter, told CNN.
The United Auto Workers union, in an unprecedented and successful action, went on strike against the Big Three automakers of Ford, General Motors and Stellantis from mid-September through the end of October.
October’s employment report included 33,200 jobs counted as lost in the motor vehicles and parts industry. BLS attributed those declines to strike activity: The agency’s strike report for that month counted 25,300 Ford, GM and Stellantis workers on strike.
Additionally, the BLS strike report for November indicated that strikes ended for 16,000 SAG-AFTRA workers after the actors union and Hollywood studios reached an agreement in the early part of last month.
Friday’s report could give more clues about whether the labor market is getting back into a more balanced and steady state, or whether it’s cooling more sharply than previously thought. On Wednesday, ADP’s private payrolls report showed a modest net gain of 103,000 jobs and slower wage gains, a smaller total than the 130,000 economists expected.
While a lot of attention, deservedly, will land on Friday’s topline payroll and unemployment numbers as well as wage gain estimates, data revisions could also prove telling, Pollak told CNN.
“For the last 10 months or so, jobs numbers have been revised downwards by an average of over 30,000,” she said. “If we see more downward revisions, then I think many people will conclude that the labor market is even weaker than it looked initially and is cooling quite rapidly.”
Layoffs not spiking, continuing claims rising
Still, job gains remain historically strong and job cuts aren’t necessarily spiking but remain higher than they have been in the past decade.
In November, US employers announced 45,510 job cuts, according to data released Thursday by Challenger, Gray & Christmas. That’s a 24% increase from October but a 41% drop from a year before, when tech companies were slashing jobs after bulking up during the pandemic.
Year-to-date, companies have announced plans to make 686,860 job cuts, according to the Challenger report. Outside of 2020, that’s the highest January through November total since 2009, when 1.24 million cuts were announced.
First-time claims for unemployment benefits, considered a proxy for layoffs, ticked up to 220,000 for the week ended December 2, according to Department of Labor data released Thursday.
Also, while first-time claims for unemployment benefits remain low, Labor Department data also indicates that people are staying unemployed for longer.
Continuing claims, filed by people who have received at least one week of unemployment benefits, have steadily marched higher in recent weeks and hit a yearly high of 1.925 million in mid-November. As of November 25, they dipped to 1.861 million.
While that exceeds the historically low continuing claims seen in 2019, it remains well below longer-term averages.
“There is no cumulative deterioration yet in the labor market that has caused previous Fed Chairs to pivot quickly from rate hikes to rate cuts to support the economy,” wrote Christopher Rupkey, chief economist with FwdBonds, in a note Thursday. “The weekly jobless data will keep the Fed on the sidelines watching carefully with the risks of doing too much or too little roughly balanced. Continuing unemployment claims looked more worrisome last week, but now it looks like a seasonal adjustment problem was responsible for the surge in the number of recipients.”
He added: “Jobless claims are back in the soft landing camp for now, but for how long?”
Holding pattern
Although it’s settling in to a time of more modest growth, the US labor market is well poised for an eventual pickup.
“It’s very much being held back by high interest rates,” said Pollak, noting the effects of inflation-battling monetary policy tightening. “Talk to any property investor and they say they’re not building because of high borrowing costs and low valuations … talk to manufacturers, and despite the various incentives and despite the huge amount of spending on factories, hiring is not really growing.”
As such, many investments are not going to reach their potential until rates come down, she said. The Federal Reserve has raised its benchmark lending rate to the highest level in 22 years in a monthslong battle to bring down inflation.
“Employers are saying that they hope and expect business activity to pick up in the back half of 2024,” she added. “The unstated assumption there is that inflation will continue to come down, and the Fed will be able to start cutting rates.”
