Both job vacancies and resignation rates in the United States have fallen back to pre-pandemic levels. Based on historical data, once the labor market begins to deteriorate, the unemployment rate may rise rapidly. Investors are closely watching this week's ADP employment and non-farm payrolls report.
The hot labor market has always been a key resistance that makes the Federal Reserve unable to cut interest rates. However, recent months' data shows that the US labor market finally has signs of cooling down, which has also caused economists and some Fed officials to worry about the future economic trend.
Both the number of job vacancies and the quit rate in the US have fallen back to pre-pandemic levels.
According to data from the US Bureau of Labor Statistics, the total number of job vacancies in April fell to 8.1 million, a three-year low. This number has dropped by more than one-third from its peak of 122 million in 2022. Currently, there is an average of 1.2 job vacancies per job seeker, approaching pre-pandemic levels. At the same time, the quit rate in April was 2.2%, also returning to pre-pandemic levels.
A Florida-based headhunter told the media that the number of consultations seeking her help has increased by about 30% recently. The time it takes to find a job has lengthened from 1-2 months from 2021-2022 to 2-5 months now.
Employers are more cautious in recruiting, and employees are also reluctant to leave stable jobs.
Becky Frankiewicz, President of ManpowerGroup North America, also told the media that many companies have stopped providing huge incentives that used to attract new employees. It is now more focused on basic wages.
Goldman Sachs: The job market may be at a turning point.
Jan Hatzius, chief economist at Goldman Sachs, stated in a recent report that the job market may be at a "turning point." He believes that if labor demand continues to soften significantly, it may lead to an increase in the unemployment rate, not just a decrease in job vacancies.
Mary Daly, president of the Federal Reserve Bank of San Francisco, also emphasized that:
A slowdown in future labor markets may translate into higher unemployment rates, as businesses need to adjust not only job vacancies, but also actual job positions.
Historical data show that once the labor market begins to deteriorate, the unemployment rate may rise rapidly. During the 2007-2008 financial crisis, the unemployment rate slowly rose from 4.4% to 5.1%, and then skyrocketed to 10%.
Employment data is contradictory.
Currently, different employment data sends conflicting signals. On the one hand, the average number of non-farm jobs added per month this year is 248,000, exceeding economists' expectations. On the other hand, the US unemployment rate in May has risen to 4%, higher than last year's low of 3.4%.
"We are faced with uncertain results, and we must respond to the uncertainty of data," said Federal Reserve Chairman Powell.
"We are facing ambiguous results and have to deal with the uncertainty of the data," said Federal Reserve Chairman Powell.
This Wednesday and Friday, the US will release "mini nonfarm" ADP employment and nonfarm employment data, respectively.
The market currently expects a net increase of 180,000 employment in June, with the previous value at 272,000. The unemployment rate is expected to remain at 4%, and the hourly wage growth rate is expected to drop from 4.1% to 3.9%.
Better-than-expected employment data will consolidate the Fed's outlook of "one rate cut per year," which is bullish for the US dollar. Conversely, if the data is weak, it will stimulate expectations of a rate cut and be bullish for gold, US stocks, and other trends.
Editor/Emily