A Slowing Jobs Market

Already the longest economic expansion in U.S. history, the last decade has generated millions of jobs for previously unemployed Americans. The late 2010s were marked by an increasingly tight labor market and wage gains not seen since before the housing crisis. In recent months, though, demand for labor has shown signs of weakening.

To be sure, some of the most important labor indicators still show plenty of strength. Here’s the unemployment rate:

At 3.6%, the U-3 rate is the lowest in 50 years. Unemployment for minorities, while still relatively elevated, is the lowest on record.

Claims for initial unemployment continue to drift lower, too.

And despite the constant rhetoric about a lack of wage growth, compensation for production and non-supervisory work is near rising at a rate near peak levels from the 90s and mid 00s.

Moreover, the continued availability of jobs has resulted in a sustained and meaningful rise in labor force participation. The percentage of prime age workers – defined by the BLS as those between the ages of 25 and 54 – has risen back to pre-crisis levels.

After a thorough review of the data, though, there are signs of weakness in the labor market. Continuing jobless claims, released weekly, have seen a notable uptick over the last few weeks – the number released January 9 was the highest in over a year.

And while wages for production and non-supervisory workers are growing steadily, average hourly earnings for the labor force as a whole grew at a markedly slower rate in December.

Survey data from the NFIB Report on small business optimism confirms the slowdown. They’ve had less trouble filling job openings since the index hit record highs in 2018 and early 2019.

And perhaps one reason small business owners have had less trouble filling job openings is because they don’t have openings at all. The JOLTS report from last week was eye-opening, if not outright concerning. The peak-to-trough decline of total U.S. job openings is the largest of this expansion.

Weak data points don’t have to mean the end of an era. Recent data could still be revised, or subsequent releases could reverse the trend. But until then, it looks like the jobs market is starting to slow.

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