[Baltimore Sun] Cracks in strong jobs market: Discouraged workers, long-term unemployed on the rise
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There are cracks emerging in America’s strong job market.
The number of “discouraged workers” jumped 21% in a month, according to the Labor Department.
“They are the ones that believe that there were simply no jobs available for them,” Colorado State University economist Stephan Weiler said Friday.
The number of long-term unemployed Americans is up 25% compared to last year. Those concerning figures were included in the most recent jobs report, which contained mostly good news. Employers added 254,000 jobs in September, and the unemployment rate edged down to 4.1%.
“Is there any cause for worrying when you have a quarter million new jobs?” Weiler said. “Worry may be a strong word, but the aggregate picture sort of blinds you to certain aspects of the labor market.”
It has become harder to find a job, said labor economist Aaron Sojourner. The job market remains very strong, he said.
The share of working-age Americans who are employed is high. Workers are enjoying record-high job security. The layoff rate is a mere 1%.
Until May, the unemployment rate was riding a sub-4% streak of two straight years. But the unemployment rate is still low. Inflation has cooled to under 3%. And wage growth is outpacing inflation. Typical wage growth is 4.7%, according to the Atlanta Fed’s tracker.
But Sojourner said the hiring rate has been on a steady decline, mirroring the rising interest rates. With the exception of the start of the pandemic, the hiring rate hasn’t been as low as it is now for over a decade.
“It’s terrible to be unemployed and to have to struggle to find a job,” Sojourner said. “That is a terribly demoralizing and scary and frustrating experience.”
The hiring rate was 3.9% before the pandemic, fell to 3.1% during the pandemic shutdowns, spiked to 6.1% when the economy began to reopen, and settled in at about 4.5% before the Federal Reserve started raising its benchmark interest rate as a lever to tame inflation.
The Fed raised the interest rate 11 times between March 2022 and last summer. At the same time, the hiring rate steadily declined. Businesses, burned from their rehiring struggles during the pandemic, held onto their workers but weren’t adding as many new workers.
When the Fed raises the federal funds rate, it makes borrowing more expensive for businesses. Weiler noted that small businesses are responsible for about half of job creation.
“Those are the ones who don’t have a lot of capital, who are probably hunkering down,” Weiler said. “And without the small businesses picking up workers, the labor market isn’t as healed as we might expect.”
Sojourner said there could be light at the end of the tunnel for discouraged workers, or folks who have been out of work for months on end.
The Fed just cut its benchmark rate by an aggressive half-point and signaled more rate cuts are on the way. The Fed has a dual mandate to foster full employment and low inflation. It’s clear the Fed has turned its attention from taming inflation to supporting the job market.
“The labor market has weakened, but it’s weakened from an incredibly strong place to just a strong place,” Sojourner said.
The Fed rate cuts are meant to guard against the worsening of the labor market. Businesses can see profit opportunities ahead, get the financing to put those into action, and hire more staff, Sojourner said.
Sojourner said he’s been concerned about the hiring rate. But the Fed rate cut last month left him feeling more encouraged. And he said the most recent jobs report included a lot of positive data.
“There should be an uptick in hiring ahead,” he said.
Have a news tip? Contact Cory Smith at corysmith@sbgtv.com or at x.com/Cory_L_Smith.
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