Way back when, about 18 months ago, I wrote that the so-called “Great Resignation” was an overstatement of U.S. labor market conditions.
Instead, I preferred the term that LinkedIn Principal Economist, Guy Berger used – the “Great Reshuffle,” which more accurately described the movement of workers throughout the economy, as they chased more money, better benefits, and enhanced flexibility.
A day before the June employment report was released and in anticipation of the Job Openings and Labor Turnover Survey (JOLTS) for May (the JOLTs data lag the jobs report by a month), both the Wall Street Journal and The New York Times declared that the “Great Resignation” was done and dusted. (The WSJ headline read, “Americans have quit quitting their jobs” and the NYT, “The ‘Great Resignation’ is over.”)
A funny thing happened on the way to those dueling headlines: Voluntary separations initiated by the employee (“quits”) actually increased by 250,000 from April to May, bringing the total number to 4 million.
Still, the editors did not have to feel squeamish on the headline call, as quits are down significantly from the August 2022 all-time series high of 5.18 million.
Olivia Cross of Capital Economics noted that “labor shortages continue to ease,” though the JOLTs report also “brought signs of labor market resilience, with the hiring rate rebounding and layoffs remaining historically low.”
The monthly jobs report for June underscored the changing conditions in the U.S. labor market. The economy produced 209,000 jobs, which was the weakest gain since December 2020, as once-hot sectors like wholesale, retail, transportation & warehousing, as well as temporary help, all shed jobs last month.
Almost half of the gains were propelled by two sectors: government, which added 60,000 jobs in June and health care, which gained 41,000 jobs.
Revisions to the two previous months combined for 110,000 fewer positions than previously reported, potentially a sign of a slowdown. For the first half of the year, job creation has averaged 278,000, a drop from 2022’s average of nearly 400,000 and about half the 2021 level of 562,000.
The June unemployment rate ticked down to 3.6%, from 3.7%, as the labor force increased by just 133,000. Notably, all of the prime age workers (ages 25 to 54) have returned to the labor force, and more are working or actively seeking work than before the pandemic.
That suggests that for the unemployment rate to drift toward the Fed’s desired 4% rate, either a lot of younger or older workers would need to enter the labor force, or some current workers would have to leave it.
Even with the labor market appearing to downshift, wages grew by 0.4%, putting the annual rate at 4.4%, as businesses, especially those seeking to attract blue collar workers, continue to pay up to attract and retain workers.
Wage growth may be the key to the Federal Reserve’s next move. In the minutes from the June policy meeting, central bank officials noted that “Labor market conditions remained tight in April and May … Recent measures of nominal wage growth continued to be elevated, although lower than their highs last year. Over the 12 months ending in May, average hourly earnings for all employees increased 4.3%, below its peak of 5.9% early last year.”
Given the still-strong jobs numbers, most expect the Fed to raise rates by another 0.25% to a range of 5.25 – 5.5% at the July 25-26 meeting.
The last time the Fed Funds rate clocked in at these heights was during a 12-month period from July 2006 to July 2007, just before they plummeted to zero in response to the Great Financial Crisis.
Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com.