WSJ Your Money Briefing - Has the Red-Hot Job Market Cooled Off for Good?

Episode Date: July 26, 2024

After several years of frenzied hiring and workers scoring higher salaries, the labor market’s growth rate has fallen back to pre-Covid levels. Wall Street Journal economics reporter Jeanne Whalen joins host J.R. Whalen to discuss what job seekers can expect in the months ahead. Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

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Here's your money briefing for Friday, July 26th. I'm J.R. Whelan for The Wall Street Journal. For the past several years, job seekers held the balance of power. The fierce competition for workers allowed them to jump to new positions and collect sizable pay raises. Those looking for work in the current labor market don't have it as easy. We've seen the number of open jobs for each unemployed person come back down to pre-pandemic levels. So it's about 1.2 open jobs per unemployed person now versus two during the peak of the red hot job market during COVID. So the kind of crazy job market that many workers were benefiting from for several years there after COVID began

has now come to an end. Wall Street Journal economics reporter Jean Whalen will join us after the break. For those who embrace the impossible, the Defender 110 is up for the adventure. This iconic award-winning vehicle has been redefined with a distinctive modern design. A reimagined exterior features compelling proportions and precise detailing built with integrity and purpose the interior boasts robust durable materials whether it's the all-terrain capability ample cargo capacity or innovative camera technology the defender 110 lets you go further and do more and everyone can enjoy the journey. Learn more at LandRover.ca. The once-in-a-lifetime red-hot jobs market may be over. Wall Street Journal economics reporter Jean Whalen joins me. Now, Jean, just to clear something up, you and I aren't related, right? We are not related. We have the best, best last name on the planet, but we are not related.

Okay. What changes have we seen in the labor market recently that have led us to this point? So we've seen the unemployment rate ticking up slowly month to month to about 4.1% last month, and that's up from 3.4% early last year. We've seen the hiring rate falling below where it was before COVID. So it had soared during the pandemic, but it's now come back to earth and is about where it was before COVID. And we've seen the number of open jobs for each unemployed person come back down to pre-pandemic levels as well. So it's about 1.2 open jobs per unemployed person now versus two during the peak of the red hot job market during COVID. So several measures have come down and shown that the kind of crazy job market that many workers were benefiting from for several years there after COVID began has now come to an end. You've spoken to a lot of job seekers. How have these changes affected them?

I spoke particularly with white-collar workers, and quite a few of them were saying that they're having a tough time. Now, of course, I was speaking to job seekers, and so they are naturally without a job and looking for one. So that's always going to be probably a frustrating experience. Some of them were saying it's taking longer this time around than it has in years past to find something. People in the human resources profession seem particularly frustrated. Many of them had really great job prospects starting around 2021, 2022, because a lot of companies were snapping up HR people so that those HR people could then try to hire as many workers as they could, because a lot of companies were just desperately scrambling for workers during the big labor shortage. And when things started to slow down,

a lot of companies jettisoned their HR people first and stopped hiring HR people. So those folks are having a hard time. Other white collar workers also are having kind of a hard time finding work at the moment. And their prospects are generally across the board about what they were before the pandemic started. And that was a very strong job market by historical terms. And so the market that we're in now is also very strong by historical terms, but it just isn't as crazy nuts as it was a few years ago. So we shouldn't view this change in the jobs market as a sign of weakness? They have weakened to a strong place, is how one economist described it

to me. But she said it's not clear whether the cooling has stopped. And she and others are concerned that the cooling could continue, the unemployment rate could continue ticking upwards. Generally, when unemployment rates start rising, they tend to do so quickly and sharply, as opposed to when they fall, the fall tends to be more gradual. So some are concerned that the unemployment rate has not stopped rising and could continue upwards toward the 5%

range, which again, is not horrible by historical standards at all, but it would mean a big difference from a few years ago. The Labor Department said the U.S. economy is still adding a solid number of positions each month, 206,000 in June. Why does that lead some to say things are slowing down? That is a very good sign for the economy that it is still adding jobs every month, that it isn't seeing jobs decline month to month. But at the same time, the unemployment rate has ticked up a bit. More people are unemployed despite that job growth than before. up a bit. More people are unemployed despite that job growth than before. There's some thinking that that might be perhaps down to more immigration in recent years. That spurt of immigration means

there are now more job seekers in the market. That's one explanation for it. But you can still have a growing number of jobs added each month and still have an unemployment rate that does grow. Other than immigration, are there other reasons why there would be more positions open but still higher unemployment? Yeah, sometimes when the labor market has been strong for a while, as it was during COVID, that can entice a lot of people off the sidelines of the economy to come in and start looking for jobs again. So say a stay-at-home parent or someone else who has been not working in a job can say, things look good, I'm going to start looking for work. And so that increases the labor pool as well and can tick the unemployment rate upwards. Many hiring managers say they're

still struggling to find skilled workers. Does that represent some lingering heat in the once hot job market? It does, absolutely. There are certain areas of the economy where employers are still often struggling to find people. Those include skilled manufacturing jobs, some construction jobs, things like accounting, all of those professions. You'll talk to small and mid-sized manufacturers and they will often say, we're still having a hard time finding good people. So that is still a problem in some parts of the country. But it's not maybe as big a problem as it was a couple of years ago.

You mentioned that some economists say the unemployment rate could rise up to near 5%. What economic factors could push the jobless rate up toward that level? That's only some economists believe that, by the way. But the factors that could push it up more are if economic growth slows down, that could cause companies to pull back more on their hiring. That could mean companies are earning less money themselves and don't need as many workers. It could cause them to start laying off more workers. At the moment, the layoff rate is still very low and pretty stable. But if companies are earning less, then we could see the layoff rate is still very low and pretty stable. But if companies are earning less,

then we could see the layoff rate tick up. Those are sort of the main factors to watch for. That's WSJ reporter Jean Whalen. And that's it for your Money Briefing. Today's show was produced by Ariana Osparu. I'm your host, J.R. Whalen. Jessica Fenton and Michael Laval wrote our theme music. Our supervising producer is Melanie Roy. Aisha Al-Muslim was our development producer. Scott Salloway and Chris Zinsley are our deputy editors. And Falana Patterson is The Wall Street Journal's head of news audio. Thanks for listening.