December’s jobs statistics will add to the labor market’s continuing contradictory signals.
Dow Jones analysts predict that the unemployment rate will have stayed at 4.2% and that 155,000 new jobs will be created this month, down from 227,000 in November.
Those numbers alone point to a still comparatively strong labor market. However, the current trend has been negative: the addition of 155,000 new jobs would rank among the fewest throughout the pandemic. Additionally, for at least six months in a row, the unemployment rate has been at or above 4%.
Additionally, a smaller and smaller portion of the employment sectors—primarily government, health care, and, to a lesser extent, construction, banking, and insurance—are seeing an increase in the number of new positions being added.
In contrast, there has been virtually no net new employment in the manufacturing, commercial, and professional services sectors—all of which typically include higher-paying jobs—in recent quarters.
In general, the hiring rate has returned to its lowest levels during the pandemic.
With the median period of unemployment lasting more than two months, the length of an unemployed spell is now significantly longer than it was prior to the epidemic.
However, there are still few layoffs, which results in a job market that is essentially at a standstill.
In a statement to investors this week, Seema Shah, chief global strategist at Principal Asset Management, stated that surveys continue to provide compelling evidence of a weakening labor demand. But as of yet, there haven’t been many job losses as a result of that weakening. Rather, it seems that the labor market has stalled, with businesses reluctant to either reduce or increase their workforces due to persistent uncertainties.
Overall, though, analysts predict that hiring will start to increase once more, if slowly, as the economy continues to grow steadily and interest rates continue to decline following Federal Reserve easing.
Indeed, this week’s report from the Bureau of Labor Statistics showed a little increase in job opportunities. According to Julia Pollak, chief economist at ZipRecruiter, this suggests that there may be better news coming, including the prospect of increased hiring as 2025 approaches.
According to Pollak, small business openings have been particularly increasing, which other studies indicate is primarily due to confidence about the state of the economy after President-elect Donald Trump assumes office.
This week’s consumer credit data also reveals that following a sharp increase in spending, American borrowers are looking to reduce their debt loads. Although that could imply a slowdown in spending, the same information revealed that borrowing for car purchases increased in November, pointing to a more balanced view of consumer health.
The short-term outlook is dismal for anyone seeking for work right now, according to Guy Berger, head of economic research at the Burning Glass Institute, which focuses on the future of labor.
However, Berger stated in a recent note that given surveys indicating U.S. enterprises are growing more enthusiastic about raising headcounts in 2025, further labor market cooling should begin to turn in the upcoming months.
For example, S&P Global said this week that the employment component of its business confidence services purchasing managers index increased for the first time in five months, bringing the index to an 18-month high.
According to Berger, a number of factors will come together to cause the job market to stabilize and perhaps even warm up a bit.