Employment Levels Now Plunge Signaling A Weak Economy

September 6, 2024

Employment levels now plunge signaling a weak economy, experts are now reporting after the latest data emerged.

In August, employers added 142,000 jobs, falling short of economists’ expectations of 160,000 new positions.

The unemployment rate decreased slightly to 4.2%, which aligned with forecasts, according to data released by the Bureau of Labor Statistics.

July’s job gains were also revised down to 89,000, lower than the initially reported 114,000, raising concerns about the resilience of the U.S. labor market amid the highest interest rates in 23 years, which led to market declines.

Wall Street is closely analyzing this jobs report for insights on how it might affect the Federal Reserve’s upcoming rate decision scheduled for September 18.

While economists broadly anticipate a rate cut, opinions vary on whether it will be by 0.25 percentage points or 0.5 percentage points.

Many predict a larger cut if the job market shows further weakness.

Economists noted that the latest jobs data strengthens the argument for a Fed rate cut, but there was disagreement on whether the disappointing job numbers would prompt a half-point reduction.

Analyst Adam Crisafulli from Vital Knowledge commented that the August report, while not as bad as feared, still indicates a softening economy.

He believes this data supports a 50 basis point cut, especially when considering other recent reports.

Conversely, some economists argued that the job growth, though below expectations, might only justify a smaller, 25 basis point cut.

Capital Economics suggested that while the labor market is slowing, the August payroll increase could lead the Fed to opt for a measured cut rather than a larger one.

Fed Chair Jerome Powell indicated last month that a cut was forthcoming, stating “the time has come” for an adjustment in monetary policy due to signs of easing inflation, though he did not specify the size of the expected cut.

Eric Merlis from Citizens noted that the economy is still adding jobs but at a slower pace, signaling a need for policy adjustments.

Meanwhile, Navy Federal Credit Union’s Robert Frick pointed out that although job hunting has become tougher, wage growth has increased and now outpaces inflation, boosting workers’ purchasing power and supporting consumer spending.

Job growth was notably strong in construction and healthcare, which added 34,000 and 31,000 jobs, respectively.

PNC chief economist Gus Faucher predicted that job additions will likely continue at this pace, with unemployment remaining around 4.2%.

He also suggested that the Fed’s anticipated rate cuts could enhance the job market in 2025, allowing businesses more flexibility to hire.

You can search for layoffs in your state here, or follow our layoff news for updates.

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Applications for unemployment benefits now surge to new highs, a sign that the white-hot labor market is starting to cool off.

First-time applications for unemployment benefits have risen to 231,000, the highest level since August, per CNN.

Data also showed that the number of continuing claims, or applications from people who have filed for unemployment for at least one week, was 1.78 million.

That’s an increase of 17,000 from the prior week, according to the Bureau of Labor Statistics.

The latest numbers come less than a week after the monthly jobs report showed the US economy added just 175,000 positions in April, less than economists expected and a steep drop-off from prior months.

US employers have now added an average of 245,500 jobs per month, versus 2023’s 251,000-per-month average.

Still, hiring remains strong, some outlets report.

Although the unemployment rate ticked up, it as seen the 27th consecutive month that the jobless rate has held under 4%, matching a streak last seen in the late 1960s.

Weekly jobless claims data tends to be volatile but, while one week’s worth of data “does not a trend make,” said Chris Rupkey, chief economist at Fwdbonds.

“We can no longer be sure that calm seas lie ahead for the US economy if today’s weekly jobless claims are any indication.”

“Company layoffs are picking up, hinting at caution on the part of companies as they weigh the outlook for the second half of the year,” he wrote in a note Thursday.

The Federal Reserve has been battling inflation by raising its key lending rate in the hopes of slowing the economy.

While the labor market has so far resisted those efforts, remaining white hot for the past 18 months despite 11 rate hikes from the central bank, Fed Chair Jerome Powell said last week that demand has “cooled from its extremely high level of a couple of years ago.”

Ian Shepherdson at Pantheon Economics said in a note earlier this quarter: “We’d need to see at least a month of elevated readings to convince us that the trend really has turned.”

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