By Matt Underwood The Jobs Report Is Canceled. Here’s What Private Data Shows.
With the official jobs report sidelined due to the government shutdown, the focus shifts to private sector data, and the picture it paints isn’t exactly rosy. While the labor market hasn’t cratered, the available information suggests a modest weakening since the summer. It appears we’re in a bit of a holding pattern – not a sharp decline, but certainly not a surge of growth. The situation reminds me of treading water; we’re staying afloat, but not exactly making progress.
The data sources offer a mixed bag. Some reports suggest a slight decline in private-sector employment, while others show a modest rebound. Different data firms and sources have varying results. Taken together, it suggests employers are hesitant to hire aggressively, but also not resorting to mass layoffs. This “low-hire, low-fire” situation has kept the unemployment rate relatively low, but it’s tough for those seeking new employment.
However, some red flags are starting to appear. There’s a noticeable uptick in layoff announcements from prominent companies. Amazon, UPS, IBM, and others have revealed plans to shed thousands of workers. It’s important to remember that layoff announcements aren’t always a perfect predictor, and some indicators don’t suggest a significant increase in job cuts. Still, economists are wary. Historically, when the labor market weakens, it can happen rapidly. Furthermore, job growth appears increasingly concentrated in certain sectors, especially healthcare. If these sectors falter, the overall economy could be vulnerable. Some experts see us “standing on the edge of a cliff.”
Federal Reserve officials are carefully monitoring the situation, aiming to prevent a downturn. They’re responding by gradually lowering interest rates. The concern is that if policymakers wait for definitive proof of a labor market downturn, it might be too late to prevent a recession. As the saying goes, by the time unemployment filings are rising, it’s already too late.
Private sector data providers are relatively good at gauging the demand for labor, such as the number of job openings. But they struggle with measuring labor supply, particularly in the context of our current economic landscape. Factors like an aging population and stricter immigration policies have slowed labor force growth. This means employers don’t need to add as many jobs to keep the unemployment rate steady. However, different economists disagree on the exact magnitude of the impact of these changes on the labor market.
The government shutdown itself is also causing economic damage, with furloughed federal employees likely cutting back on spending. Since the shutdown began, around 30,000 federal employees have filed for unemployment benefits. Another important note is that there is a divide in the economy; large employers have added jobs while small businesses have reduced payrolls. Manufacturing and the leisure and hospitality sectors are showing weakness. The softening job market and potential for layoffs also make it difficult for people to demand raises, with employee confidence indicators reaching their lowest level in months.
The truth is, many workers are stuck, feeling like they lack the leverage to negotiate better terms or find other opportunities. Overall, workers feel they are trapped in their current positions.
Many have pointed out a significant rise in household and credit card debt. Low and middle-income families are seriously concerned about affording essential things like food, shelter, heat, and electricity this winter. While wages haven’t kept pace with inflation, people feel prices “felt more expensive” than they did before. It appears we are dealing with a bifurcated economy, and many are putting their purchases on credit cards. There’s growing concern of a debt bubble on the horizon.
One key theme that seems to be emerging is the use of the term “AI bubble” as a convenient way to downplay economic problems. While AI is undoubtedly having an effect, there are other factors at play, including inflation, rising housing costs, tariffs, consumer spending, and general financial uncertainty. The phrase “AI bubble” allows us to sidestep these factors.