U.S. Department of Labor data issued Wednesday suggests a two-tiered job market has emerged, in which workers enjoy strong job security while the unemployed may have trouble finding a new gig.
"There's a bifurcated labor market," said Julia Pollak, chief economist at ZipRecruiter. "There are haves and have nots."
Hiring has slowed, but so have layoffs
Companies hired nearly 5.5 million people in November, the fewest since 2017, according to the monthly Job Openings and Labor Turnover Survey. The hiring rate — the number of hires during the month as a percent of employment — was 3.5% in November, the lowest since 2014.
These comparisons exclude the early days of the Covid-19 pandemic, in March 2020 and April 2020.
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Further, the quits rate — a barometer of workers' willingness or ability to leave jobs — declined to 2.2% in November, according to JOLTS data. That's "still solid" but not as strong as its pre-pandemic high point in 2019, wrote Daniel Zhao, lead economist at career site Glassdoor.
Meanwhile, layoffs continue to hover near historic lows, contrasting with weaker hiring and job turnover. The layoff rate was unchanged at 1% in November. It had never dipped to that level, or below, before March 2021.
What this all means: Hiring and job hopping have slowed but companies are still loath to let go of their existing workers, amounting to greater job security for the average worker relative to past years.
The average worker's odds of being let go are "unusually low," Pollak said. "You can sit pretty."
However, the hiring processes may be "pretty slow and cautious" for the unemployed and for job seekers, Pollak added.
"Expect to do more interviews and face a little bit more resistance in that process," she said.
Weaker data isn't 'flashing a red flag yet'
The labor market has been cooling gradually from red-hot levels in 2021 and 2022 as the U.S. economy reemerged from its pandemic-era shutdown.
The Federal Reserve raised borrowing costs to rein in the economy and labor market to tame persistently high inflation. While the central bank seems poised to start reducing interest rates in 2024, the aggregate effect of its policy seems to be weighing on the job market, economists said.
That said, there doesn't seem cause for concern just yet, they added. Data suggests the economy is heading for a "soft landing," a Goldilocks scenario in which the Fed tames inflation without triggering a recession.
"Soft quits (& hires) are not flashing a red flag yet, but they're certainly not pointing to an overheated job market," Zhao wrote.
The unemployment rate, which was 3.7% in November, is also low by historical standards.
Companies may be encouraged if the Fed starts cutting interest rates and ramps up hiring, Pollak said.
There are some "glimmers of hope." Job openings increased in the interest-rate-sensitive construction and durable goods manufacturing sectors in November, for example, suggesting there's rising confidence about potential future growth and investment, she added.
Of course, there's risk the labor market could cool further from here.
"Increasingly JOLTS signals to me that we may be edging past the point of a soft landing" and into a labor market cooler than 2019 levels, Zhao said.
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