Rosenberg Research founder and top economist David Rosenberg stated that the US employment market is facing a key turning point, which may mean that the Federal Reserve will cut interest rates faster than expected.

In a report this week, Rosenberg mentioned the ratio of job vacancies to unemployment rate in the US and issued another warning to the job market. According to the Bureau of Labor Statistics data, this indicator has decreased significantly in recent months due to a slight increase in the unemployment rate combined with a decrease in job vacancies.

Government data shows that in July, the number of job vacancies in the US dropped to 7.6 million, lower than the peak of 12.1 million in 2022. Meanwhile, the unemployment rate in August was 4.2%.

However, Rosenberg predicts that the rate of increase in unemployment will be faster than the rate of decrease in job vacancies, which will mark a key turning point in the job market or highlight the necessity of faster rate cuts from now on.

Rosenberg wrote: 'We believe that the rise in unemployment is replacing the decline in job vacancies, which will accelerate the pace and urgency of the Fed's future rate cuts. The recent reversal of the driving force behind the V/U normalization is a key insight. Unemployment is rising, increasing by 0.5% just this year, while the vacancy rate has stabilized.'

For months, Rosenberg has been pointing out the weakness in the labor market. Previously, he predicted that by the end of this year, the unemployment rate could rise to over 5%, attributing this to employers who hoarded labor during the pandemic now starting to lay off workers, leading to a net loss of jobs in the US.

Companies have already begun to signal the start of downsizing or speeding up layoff plans. According to a report from the career transition company Challenger, Gray & Christmas, layoffs announcements in August increased by 193% compared to the previous month. At the same time, recruitment plans from the beginning of the year until August have fallen to the lowest level since 2005.

Federal Reserve officials are also cautious about the employment situation. Federal Reserve Chairman Powell said in a recent press conference that the job market may be approaching a point where 'further declines in job vacancies will more directly translate into unemployment.'

Rosenberg said, 'We believe the recent actions represent a real inflection point in the job market. As the labor market slows down, we will see more moderate changes in vacancy rates, while the unemployment rate will see greater changes. It's not just us (who think this). In a press conference last week, Powell answered almost the same when asked about this issue.'

However, most experts believe that the job market still has a solid foundation. According to the latest employment report, the unemployment rate in August was 4.2%, still close to historical lows. At the same time, economic growth remains resilient. According to the latest estimate from the Atlanta Fed, US GDP is expected to grow by 3.1% in the third quarter.

Editor/Rocky