US: Labor market recovery, limited employment adjustments
2024-10-07
In the September US employment data released on October 4th, the number of non-farm sector employees (an increase of 254000 compared to the previous month) exceeded 200000 for the first time in four months. The data for July and August have been adjusted upwards (with a cumulative increase of 72000 people), and the three-month average trend (with a month-on-month increase of 186000 people) has further strengthened. The unemployment rate (4.1%) has been declining for two consecutive months, and the average hourly wage (up 0.4% month-on-month) has grown faster than the rate of price increases. The leading indicators indicate a recovery in the labor market after August. The recession indicator of the Sahm rule (0.50%) has decreased for the first time in eight months. Although there are concerns about economic recession when it reaches the threshold of 0.50% for three consecutive months, its upward trend has eased. Detailed data shows that the number of employees in the service industry, mainly in education, healthcare, leisure, and hospitality, has significantly increased since May 2023, and the labor demand in the face-to-face service industry remains strong. On the other hand, the average weekly working hours (34.2 hours, a decrease of 0.1 hours compared to the previous period) have dropped to the lowest level since the pandemic. In addition, the August Job Vacancies and Labor Mobility Survey (JOLTS) released on October 1st showed an increase in job vacancies (8.04 million) and a decrease in layoffs (1.608 million), confirming that the sharp adjustment in the labor market in July was only a temporary phenomenon caused by factors such as hurricanes. However, the number of voluntary resignations (3.084 million) continues to decrease, indicating that the trend of workers changing jobs has weakened.
From these results, it can be seen that current labor adjustments are more reflected in working hours rather than employment. The slow increase in layoffs indicates that labor adjustments through employment are still being suppressed. One of the reasons behind this is enterprises' "Labor boarding" behavior. After the epidemic, the mismatch between labor supply and demand has intensified. To ensure the required personnel, enterprises have maintained the employment of employees. Therefore, in the past few years, workers have had an advantage over enterprises in the labor market. The Federal Reserve (FRB) believes that labor supply and demand are balanced, and the recent rise in the unemployment rate is mainly due to structural increases in labor supply caused by factors such as immigration. However, decreasing labor demand may reduce workers' need to hoard and prompt companies to reduce labor costs through employment adjustments, thereby quickly causing an imbalance between labor supply and demand. This trend may manifest as a decrease in job vacancies, an increase in layoffs, a decrease in wage growth, and other phenomena. As the focus of the labor market shifts from supply to demand, data on enterprise labor demand will receive greater attention.
From these results, it can be seen that current labor adjustments are more reflected in working hours rather than employment. The slow increase in layoffs indicates that labor adjustments through employment are still being suppressed. One of the reasons behind this is enterprises' "Labor boarding" behavior. After the epidemic, the mismatch between labor supply and demand has intensified. To ensure the required personnel, enterprises have maintained the employment of employees. Therefore, in the past few years, workers have had an advantage over enterprises in the labor market. The Federal Reserve (FRB) believes that labor supply and demand are balanced, and the recent rise in the unemployment rate is mainly due to structural increases in labor supply caused by factors such as immigration. However, decreasing labor demand may reduce workers' need to hoard and prompt companies to reduce labor costs through employment adjustments, thereby quickly causing an imbalance between labor supply and demand. This trend may manifest as a decrease in job vacancies, an increase in layoffs, a decrease in wage growth, and other phenomena. As the focus of the labor market shifts from supply to demand, data on enterprise labor demand will receive greater attention.