Economists say the U.S. job market appears to be increasingly split into two trajectories, with steady demand for skilled labor and waning interest in hiring more “knowledge-based” professionals. .
The evidence is found in the data, which shows that unemployment rates are higher for those working in professional and business services, and lower for those working in manufacturing.
“Brain is a buyer's market, brawn is a seller's market,'' said Aaron Terrazas, chief economist at job search site Glassdoor.
On Friday, the Bureau of Labor Statistics released the latest monthly payroll data for the U.S. economy. Total employment increased by 175,000 people in April. The unemployment rate was 3.9%, up slightly from 3.8% in March.
The number of employees in April was lower than the expected 240,000.
It's not that America creates only, or even most, low-wage jobs. The healthcare industry continues to drive the employment boom, with employment increasing by approximately 4.5% over the past year, representing approximately 750,000 new jobs. Other industries experiencing strong growth include specific sectors such as government jobs, social work, travel, tourism, and the arts, along with some manufacturing.
However, the overall labor market remains stagnant, as seen in a report earlier this week showing that employment rates remain flat. At the same time, there are no major changes in worker turnover or dismissal rates. Economists led by Guy Berger of the Burning Glass Institute Research Group are calling it a “great stay.”
“It's a good time to have a job, but it's not a great time to be actively looking for a job,” he wrote in Wednesday's Substack newsletter.
Many U.S. consumers are also beginning to report signs of a deteriorating employment situation. In its latest report on consumer confidence, the Conference Board's business group found that respondents to its monthly survey were less positive about the current labor market and more concerned about the future economy, job availability and income. He said that he reported that
This is consistent with the findings of the New York Fed's monthly survey of consumer expectations, which found that more survey respondents feel pessimistic about losing their jobs or finding new ones. It is reported that. Respondents rated the average chance of losing their job in the next 12 months as almost 1 in 6. This was above pre-pandemic levels and the highest since September 2020.
“Companies aren't as enthusiastic about adding headcount,” said Sarah House, managing director and senior economist at Wells Fargo.
But why has payroll data remained strong? One reason is increased supply due to rising labor force participation rates and a surge in immigration.
“There is an increased 'supply' of labor to businesses looking to hire or add staff,” House said.
But she says those trends are also likely to decline, if not already.
One sign that the job market remains strong is that the number of individuals collecting unemployment insurance remains very low.
Joe Brusuelas, principal and chief economist at RSM US LLP, said there has been a “gradual and orderly slowdown” in worker turnover and the number of companies with job openings. This is consistent with private companies “carefully managing their workforce.”
On Wednesday, Federal Reserve Chairman Jerome Powell said that despite the stalling fight against accelerating price rises and the apparent softening of the labor market, the central bank is He said he has no plans to change interest rates for the time being.
He said the central bank had the “luxury of strong growth and a strong labor market” to keep interest rates steady until inflation fell further, dismissing any suggestion that the economy could experience “stagflation.”
However, he noted that there was a possibility of rate cuts if the labor market weakened “unexpectedly.”
“We're now focused on another goal,” Powell said, citing the Fed's dual mission of balancing inflation and employment as inflation continues to ease.
“Employment targets are back in focus, so that's what we're focused on,” he said.