The latest economic data this week shows that the US labor market is cooling, and hiring has slowed down. However, layoffs have remained remarkably low.
The unique combination of these factors indicates a relative period of stability on the job market. However, the long-term trend remains unclear.
Jobless claims fall as hiring slows
ADP released data on Wednesday showing that private payrolls rose by 122,000 during December. This is a decline from 144,000 in November.
The Department of Labor also reported that 201,000 people filed new unemployment claims in the week ended January 4. This is a decrease of 10,000 people from the prior week, and lower than the 215,000 economists expected.
This data shows a slowdown in the growth of jobs, as well as a refusal by employers to reduce their existing workforce.
Current stability is defined by a low rate of layoffs and quits.
Yahoo Finance’s chief economist Nela Richardson said: “That is exactly why we saw stability on the labor market in 2024.”
Low layoffs and low resignations.
Low layoffs (which show employer confidence) and low quitting, which is a sign that employees are not confident about finding new jobs, has created an equilibrium on the labor market.
The signs of an “no-hire, no-fire” economy
The number of job openings in November was at its highest since May 2023. However, other indicators point to a “no fire, no hire” status on the labor market.
The November JOLTS report released Tuesday shows that the rate of hiring has fallen to 3,3%, down from 3.4% in October.
The quits rate (an indicator of employee confidence) fell from 2,1% to 1,9% in October.
The two metrics have now dropped below what they were prior to the pandemic’s onset in March 2020.
In a Wednesday note sent to clients, Renaissance Macro’s head of Economics Neil Dutta wrote: “Labor Markets keep Cooling.”
The quit rate is a better indicator than the opening rate, as we pointed out yesterday.
Cooling affecting different sectors
ADP’s Richardson pointed out that the cooling was occurring at the edges.
The white-collar workforce is taking longer to get a job, and an increasing number are having their working hours reduced. This results in wages not keeping up with inflation.
Richardson warned against complacency.
It’s not stable. It is well known that economies can change quickly.
Her remarks also included three monthly decreases in the manufacturing sector, which could be re-energized by possible interest rate reductions.
Perspective and outlook of the Fed
Federal Reserve continues to focus on the evolving dynamics.
Fed chair Jerome Powell stated on December 18, that labor markets are “looser” than they were before the pandemic. Powell also noted that for the time being, labor markets have cooled in an “orderly and gradual way.”
Powell’s remarks suggest that the Fed closely monitors the data to look for signs of inflation easing.
Powell, the Fed chairman said that the current situation is not one where further cooling of the labor market would be necessary to bring inflation to 2%.
December jobs report awaited
This Friday, the US December Jobs Report will provide a broader overview of the US job market.
The consensus is that 163,000 new jobs were added to the US economy in December. This represents a decline from November’s 227,000. Meanwhile, the unemployment rate will remain at 4,2%.
The report is crucial to obtaining a comprehensive picture of the U.S. employment market.
The post US Job Market: ‘Stable,’ New Data Shows Low Layoffs and Quits could be updated as new information becomes available.
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