The News
How’s the US labor market looking these days? In a word, chill.
Employers aren’t as hungry for new workers as they used to be: On Tuesday, the government reported that hiring once again dipped in June, hitting its lowest level since the country began recovering from the pandemic. At the same time, not many Americans are losing their jobs. Last month the rate at which individuals were fired or laid off fell back to its all-time low.
People aren’t bailing on their bosses with abandon anymore, either. The rate at which workers quit their jobs inched down too in June, and has now returned to a point last seen in 2018.
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Jordan’s view
Tuesday’s numbers are the latest reminder that the country has long since exited the era of the Great Resignation, when furious competition to staff up after the pandemic led to mass job hopping. Instead, it has entered a period of low turnover some have dubbed the Great Stay, where fewer workers are being hired, fired, or striking out for a new opportunity.
The question on the mind of many economists is how long this unusual balancing act can last. It’s possible that the low rate of churn is simply a sign that the country has reached a relatively stable state of full employment. But the continued slowdown in hiring has left some worried that the US could be on the edge of a more dramatic downturn as the high interest rates that the Federal Reserve has kept in place to fight inflation continue to bite.
As Nick Bunker, the director of macroeconomic research at Indeed, put it on X: “‘Limited hiring, limited firing’ could be a new equilibrium, but at some point, hiring needs to level off. Unfortunately, we aren’t there yet.”
Guy Berger, director of economic research at the Burning Glass Institute, described the recent combination of declining hiring and layoffs as “really weird.” Typically, you expect those two indicators to move in opposite directions, as businesses either step up their recruiting in anticipation of strong growth, or trim their workforces in anticipation of recession.
“It makes you a little more worried about whether we’re entering a late 2007 or late 2000-type scenario where we’re not in a recession, but not too from what could be a recession,” Berger said.
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That uncertainty will likely be on the minds of Fed officials as they meet on interest rates this week. Chair Jerome Powell has said that he and his colleagues wanted to see more data indicating that inflation was cooling before committing to rate cuts, but acknowledged in recent testimony before Congress that they are newly concerned about risks to the labor market. The central bank was widely expected to wait until September for a cut; Tuesday’s data seems unlikely to change that plan, but could make a further delay unlikely.
Some worry that the Fed has already waited too long. Overall job growth has slowed with hiring in recent months, while the unemployment rate has risen. Though both are still healthy by historical standards, further deterioration could spell trouble. Because monetary policy’s effect on the economy is typically felt with a delay, any response by the Fed might not come until it’s too late.
“It’s not time to cut rates. It’s past time to cut,” Economic Innovation Group Chief Economist Adam Ozimek said on X.
Room for Disagreement
Mohamed El-Erian, the former CEO of bond investing giant PIMCO, says the Fed can get away with holding off until September for a rate cut. The risk is that a random bad batch of inflation data might convince them to wait even longer. “While waiting for September to cut is not a major issue in the grand scheme of things, a further delay would be of greater concern,” he writes at Bloomberg.