A robust job market that has defied expectations for years is showing more concrete signs of slowing.
Companies’ job postings have fallen sharply. Layoffs are creeping up. And new data released Friday show that U.S. job creation has slowed to its lowest level in nearly a year and a half.
This is all a welcome development for the Federal Reserve, which has been trying to cool the economy to bring down widespread, stubborn inflation. However, new geopolitical turmoil threatening to renew energy price spikes in coming weeks could complicate the Fed’s work, leading to a more protracted period of layoffs that could spiral into a recession.
OPEC, allies move to slash oil production, eliciting blistering White House response
“Things are cooling down, but this is just the beginning of the descent,” said Giacomo Santangelo, an economist at the jobs site Monster. “We’re still 30,000 feet in the air and the fear is that we’re going to hit the ground and keep falling.”
That uncertainty sent stocks tumbling on Friday, as investors worried that the stronger labor report would lead the Fed to continue aggressively raising interest rates. By late afternoon, the S&P 500 had fallen roughly 2.8 percent, while the Dow Jones industrial average was down more than 2 percent. The tech-heavy Nasdaq sank by 3.8 percent.
The number of jobs in the United States grew in September for the 21st consecutive month and the unemployment rate remains at pandemic lows. The joblessness rate unexpectedly fell to 3.5 percent in September, down from 3.7 percent a month earlier, but it’s partly because more Americans have dropped out of the labor force or stopped looking for jobs.
Still, a number of major companies are hitting the brakes on hiring and, in some cases, letting workers go. St. Vincent Charity Medical Center in Cleveland said this week it will lay off 978 employees. Hardwick Clothes, the country’s oldest suit-maker, is shutting down a plant in Cleveland, Tenn., that will cost 129 people their jobs. And Peloton, the home gym equipment maker and pandemic darling, is laying off 500 workers, or 12 percent of its workforce, in its fourth round of job cuts this year.
Public schools lost 21,700 jobs last month, while the trucking industry was down 11,000 positions and employment in insurance fell by 9,000, the Labor Department’s latest jobs report shows. There were also thousands of job losses in retail, legal services and advertising. In all, U.S. employers added 263,000 jobs in September, considerably fewer than the year-to-date average of 420,000 jobs per month.
Job growth slows in September but remains solid after months of strong labor market expansion
Overall U.S. job openings fell by nearly 10 percent in August, as firms across industries rolled back their plans. Facebook parent company Meta, for example, is implementing a hiring freeze. The tech giant is pausing new offers to job candidates, sourcing candidates, approving internal transfers and even finalizing graduations from its Bootcamp training program, according to a memo viewed by The Washington Post.
“It’s a recessionary-like slowdown … that we’re seeing in the economy that’s dramatically impacting tech stalwarts that have been growing at a rocket-ship pace,” said Dan Ives, an analyst at Wedbush Securities. “Now there’s some tough decisions that need to be made as we expect some significant cost cuts to happen across Silicon Valley over the next three to six months.”
Pick your economy: Booming labor market or fizzling growth
Overall, layoffs are also beginning to tick up, to 1.46 million in August from 1.4 million the previous month, according to a separate Labor Department report released earlier this week.
In Humboldt County, Calif., Jolan Banyasz recently laid off two longtime employees at her clothing shop because of a dramatic slowdown in business. Sales fell 60 percent in September from the year before, and she said there are few signs that demand will bounce back soon. She’s down to one part-time employee.
“There’s been a steady decline, so I’m definitely not hiring,” said Banyasz, owner of Sweet Grass Boutique. “The cost of running a business is way up and it makes me nervous for the future.”
Financial concerns and shifting consumer need are also driving an overhaul at St. Vincent Charity Medical Center, the Ohio hospital that’s laying off more than 90 percent of its staff. Executives say they struggled to keep up with costs during the pandemic, and are now replacing traditional inpatient care with primary and urgent care clinics. Just 100 employees out of nearly 1,100 will remain.
“Seismic shifts in health care over the last decade have created a challenging environment,” the hospital said in a news release. “The rise in demand for outpatient care, declining inpatient volume and the growth of telehealth, all of which were accelerated by the covid-19 pandemic, have placed additional financial pressure on the hospital.”
Beyond layoffs, many business owners say they are paring down hiring plans or putting them off altogether until they feel more confident in the direction of the economy.
Fears of a global recession have picked up in recent weeks, as decades-high inflation, market volatility and oil shocks ripple through world economies. Earlier this week, a coalition of oil-producing countries led by Saudi Arabia and Russia agreed to slash oil production by 2 million barrels a day, the largest OPEC cut since early in the pandemic.
The move is expected to lift energy prices, although not quite to the levels seen in early June due to counter measures already in place.
“An average cut with 2 million barrels a day should push gasoline prices higher, but not at a pace that would bring back prices to … $5 a gallon,” Quincy Krosby, chief global strategist for LPL Financial, wrote in an analyst note this week.
Global economy weakening amid inflation fight, war and lingering pandemic
Earlier this month, before the OPEC move, the central bank’s own forecast for economic growth this year was revised down to 0.2 percent, about as close to a downturn as the country can come without actually slipping into one.
“Big picture, companies are very much preparing for the possibility of a downturn,” said Julia Pollak, chief economist at ZipRecruiter. “They’re focusing on essential hiring rather than nice-to-have hiring. But many are still continuing to hire because they absolutely have to.”
Even when firms are hiring, they’re tamping down on pay raises and other wage hikes. Average hourly earnings ticked up in September, but at a slower rate of 0.3 percent to $32.46 an hour, in a sign that employers have been able to attract workers without further increasing pay.
“The boiling-hot labor market is letting off a little bit of steam, but the water is still hot,” said Guy Berger, principal economist at LinkedIn. “The real dream for the Fed is that this continues — that job growth remains strong but underlying inflation comes down — though I’ve become less optimistic about that possibility.”
U.S. economy stumbles into final stretch of 2022 facing new pressures
Underscoring the Fed’s challenge, he said, is that it takes months for higher interest rates to work their way across the economy. There are fears that by the time the economic pain becomes evident in the job market, the central bank will already have made borrowing conditions overly tight, setting the stage for a recession.
Over the last 75 years, there has been an abrupt increase in the U.S. unemployment rate before every recession, according to Joe LaVorgna, chief economist at SMBC Nikko Securities America and former Trump White House economic adviser.
“When the unemployment rate rises, it does so suddenly and quickly,” he said, adding that he expects a recession this year. “The Fed should not take comfort from today’s historically tight labor market.”
Harriett Logan has a dozen employees at her Cleveland bookstore, Loganberry Books. And although she would like to hire more, Logan said she’s hesitant to bring on new workers in case the economy sours.
Earlier this year, encouraged by fast-rising book sales, she ordered more titles than usual for the holidays. But now, with walk-in traffic on the downswing, she said she’s second-guessing her decision. Plus, she said, splurging on extra inventory means she has less cash on hand to hire new employees.
“It’s a double-edged sword: I need more people but I’m not certain if things are going to sell fast enough to justify hiring someone else,” she said, adding that she’s already hired three rounds of new workers this year. “And, to be honest, I am just so tired of interviewing people.”
Naomi Nix and Lauren Kaori Gurley contributed to this report.