There are growing signs that the hottest employment market in the generation is starting to cool. As the crypto bubble bursts, economists have historically had low unemployment rates as tech companies are retreating employment and consumers are becoming more and more sophisticated about spending. I think it is likely to rise.
The Federal Reserve made it clear last week when it raised interest rates 0.75%. The employment market that the Federal Reserve sees as leaning to an unhealthy degree in favor of workers.
Rising unemployment does not necessarily mean a recession, but it does indicate that the employment market is changing. The best indicators that change is in progress are:
This is part of the Fed's plans
Federal Reserve Chairman Jerome Powell said unemployment rates The Federal Reserve raises interest rates at the fastest pace in 25 yearsAt the Central Bank Forum in Sintra, Portugal on Tuesday, Powell said. "There is no guarantee," he told the Federal Reserve Board. Interest rates can be raised enough to slow inflation without causing a recession.
"We believe we can do it. That's our goal," he said, but "it's harder. The route is narrower.
Last week, the Fed revealed that unemployment could be boosted by a new focus on controlling inflation at all costs. After previously predicting that the unemployment rate will drop to 3.5% this year and next year, the Fed predicts it will rise to 3.9% next year and 4.1% the year after.The Fed has also updated its policy statement. Remove the previous prediction that the labor market "remains strong".
"They are now forecasting a significant rise in unemployment by 2024, withdrawing the statement in the statement that the labor market remains strong." Is noteworthy, "said Chief Brian Colton. Fitch Group economist who was attracting attention at that time.
In the Federal Reserve's view, the 4.1% unemployment rate would still be low by historical standards, Powell emphasized at a post-hiking press conferenceHiking
"Of course, we are not trying to unemploy people. Of course, too many people are working and need to work. I don't think there are few, but I don't think you can really have such a labor market I hope the prices will not be stable. "
"We didn't see the unemployment rate below 4% until a few years ago. We've seen it for a year or so in the last 50 years," Powell said. "4.1% unemployment and inflation are on track towards 2% — I think it will be a successful result."
Layoffs, employment freezes in some sectors
Already, the employment market has cooled from the rapid pace earlier this year, adding 330,000 last month from the 700,000 new private sector jobs created in February. According to FactSet, economists expect June recruitment reports to be even slower, creating about 250,000 jobs.
According to Wells Fargo analysts, the three-month average of job creation has fallen to the February 2021 average.
Some sectors of the economy, especially technology, are reacting even harder. The technology-intensive Nasdaq Composite has lost one-third of its value this year, but more speculative assets such as cryptocurrencies have evaporated.
Layoffs continue, with tens of thousands of workers in the tech sectoracquiring and establishing an ax in recent months. Recruitment and dismissal of jobs that are frozen even in the companies that have been. According to the tracking site Layoffs.fyi, about 30,000 technicians were reduced in May and June. This includes fast-growing startup Coinbase, which cut 1,100 jobs earlier this month, and more established companies such as Netflix, Compass, Redfin and Sprinklr.
Tech is one of several industries that are particularly sensitive to rising interest rates, and if recruitment is expected to slow,is the chief economist of accounting firm RSM. One Joe Brusuelas said. "Employment is visibly slowing in interest rate-sensitive areas of manufacturing, trade, transportation, goods production, and the financial industry," Brusuelas said in a blog post.
SMEs responsible for most jobs in the United States are similarly reducing their hiring plans. SMEs continue to report problems in hiring workers they consider to be qualified, but the percentage of companies that say they plan to increase their workforce is from a record high in 2021, According to, it has fallen into the National Federation of Independent Business.
Retail showing signs of problems
Another sector sensitive to slowing consumer spending is a labor market indicator of retail labor activity. It supports the idea.
According to UKG Vice President Dave Gilbertson, labor activity in this sector declined in March, April and May and reversed in June. So far, the decline is primarily due to workers reducing overtime. "If we see a slight decline in labor activity in the coming months, it indicates a very modest rise in unemployment," he said.
"Big jumps, positive or negative, can confuse what the Fed can do," he said.
So far, technical and retail weaknesses have not been translated into broader layoffs. Initial applications for unemployment assistance have increasedsince mid-March, butongoing claims remain at record lows. ..
According to a study by Deutsche Bank, which analyzed unemployment insurance claims dating back to the 1960s, a 10% increase in recurring claims (up about 150,000) will cause a recession in the next two months.
"[S] o There are no trends at this time, but it won't take long to change the situation," the researchers say.
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