Job Market Still Healthy, But Recession Fears Are Growing: NPR

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A “Hiring Now” sign is displayed on a storefront in the Adams Morgan neighborhood of Washington, D.C., on October 7, 2024.

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A “Hiring Now” sign is displayed on a storefront in the Adams Morgan neighborhood of Washington, D.C., on October 7, 2024.

Anna Moneymaker / Getty Images

The US job market closed 2024 on a high.

Employers added 223,000 jobs in December, capping a year in which the economy added 4.5 million jobs, more than filling the deep hole left by the coronavirus pandemic two years ago.

While some major companies have announced job cuts in recent weeks, the overall job market remains tight. The unemployment rate fell in December to 3.5%, matching its lowest level in half a century.

Demand for workers has remained remarkably strong over the past year, even as the Federal Reserve has been aggressively trying to slow the economy by raising interest rates, in an effort to combat inflation.

“The job market has been at the center of the storm,” says Dave Gilbertson, vice president of UKG, which makes scheduling software.

Employment has slowed since the first half of last year, when employers were adding more than 400,000 jobs per month on average. Further slowdowns are expected, as companies prepare for a potential recession.

“They kind of pump the brakes a little bit when hiring,” Gilbertson says.

Companies stick to their workers

So far, there’s little evidence of broad job cuts, despite high-profile layoff announcements this week from companies like Amazon and Salesforce. New claims for unemployment benefits remain at historically low levels.

Some companies say they are reluctant to let employees go, even if demand drops, after struggling for the past two years to find enough workers.

More than 400,000 workers entered or returned to the workforce last month, and the share of adults who are working or looking for work has increased by a tenth of a percent.

Many high-tech companies cutting jobs have expanded rapidly in recent years.

“These companies benefited from a pandemic economy where people were homebound, they were internet-hungry and they were hungry for devices, and spending was geared toward services and goods that technology provided,” says Nella Richardson, chief payroll economist. Processing company ADP.

“We are now at a point where consumer spending has shifted again,” she says. “Technology responds by stepping back.”

The Fed would welcome a cooler job market

Financial firms also reduce employment, in the face of rising interest rates. Factories have also cut back on hiring. Manufacturers added just 8,000 jobs in December, a quarter of the monthly average last year.

“We’re waiting for the order to come back,” says Tim Fiore, who conducted a Monthly survey of factory managers Institute for Supply Management.

“The first half of 2023 is going to be slow,” says Fury. “But the second half of 2023 is going to be very strong.”

The Fed would welcome some slowdown in hiring, especially if it helps limit wage gains. The central bank is concerned that rapid increases in wages could fuel inflation, especially in labour-intensive service firms.

Average hourly wages in December were 4.6% higher than they were a year ago. The annual increase in November was initially reported at 5.1%, although it was revised down to 4.8%.