In the second half of 2024, the U.S. labor market entered a new phase: both hiring and layoffs decreased.

“We are in a ‘less hiring, less laying off’ environment,” Aditya Bhave, chief economist at Bank of America, said in a note Tuesday. “In the spring of 2022, there were two job openings for every unemployed person. Now that number is just over one. In other words, there are fewer opportunities.”

Job openings in September fell to their lowest level since January 2021, while the employee turnover rate, a measure of employee confidence, also fell to 1.9% from a revised 2% in August. There were 1.09 job openings for every unemployed person.

“The low level of quits is consistent with the decline in job openings,” Nancy Vanden Houten, chief U.S. economist at Oxford Economics, said at the time.

New data released by the Labor Department on Wednesday showed that initial claims for unemployment benefits fell to a seven-month low of 213,000 in the week ending November 23. That was down from 215,000 the previous week and below the 216,000 economists had forecast.

But the number of people continuing to claim unemployment benefits - people who have applied for unemployment benefits for at least two consecutive weeks - rose to 1.907 million last week, the highest level since November 2021.

“The recent increase in continuing claims broadly supports the view that this is high enough to cause the unemployment rate to continue to rise,” Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, wrote on Wednesday.

Data showed that the U.S. unemployment rate was 4.1% in October, lower than the peak of 4.3% this summer but higher than 3.8% a year ago.

Not only has job growth slowed overall, but recent hiring trends have been concentrated in just a few industries. Bank of America noted that three industries -- health care and education, leisure and hospitality, and government -- have driven payrolls over the past six quarters. Nonfarm payroll growth has averaged just 104,000 over the past three months. "Hiring in other industries has largely stagnated over the past few months," the team wrote.

Despite the rise in unemployment, Bhave and his team noted that overall layoffs remain low, writing that "while the labor market has eased, it has not fallen sharply."

"A surge in layoffs would create a negative feedback loop between consumption and the labor market," Bhave said. "However, layoffs are currently below pre-pandemic levels, which is consistent with low initial jobless claims."

The latest U.S. consumer sentiment index hit its highest level since July 2023 in November, driven by optimism about the labor market and future job opportunities as layoffs remained rare.

More broadly, the U.S. economy remains resilient, with GDP expanding again at a robust 2.8% rate in the third quarter despite elevated interest rates and sticky inflation. “The economy has likely weathered the Fed’s rate hikes,” Bhave wrote.

Article forwarded from: Jinshi Data