A monthly report on US employment due Friday is set to show net hiring slowed again to a fresh post-2020 low of 182,000 in August, according to Bloomberg Economics.
(Bloomberg) — A monthly report on US employment due Friday is set to show net hiring slowed again to a fresh post-2020 low of 182,000 in August, according to Bloomberg Economics.
Two high-profile events in particular — the Hollywood writers’ strike and the bankruptcy of trucking company Yellow Corp. — probably weighed on the numbers, Bloomberg economists Anna Wong, Stuart Paul and Eliza Winger wrote Thursday in a preview of the report. Wage growth probably also slowed, they said.
“The two main drags on August’s private payrolls are the Writers Guild of America strike, and layoffs following the bankruptcy of trucking company Yellow,” Wong, Paul and Winger said.
“We think the cracks in the labor market will widen in coming months, with a potential strike by the United Auto Workers and a possible government shutdown turning payrolls negative in the fall.”
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Hiring has been slowing throughout the year as employers have completed the process of restaffing positions that were lost in the initial stage of the pandemic. In June and July, hiring rates finally returned to pre-pandemic levels, at just under 200,000 per month.
That leaves the US labor market at a critical juncture, with forecasters wondering whether the slowdown will continue — raising recession risks — or whether job creation can settle into a new normal, more in line with the pre-pandemic pace.
Several economists — including those at the Federal Reserve, Bank of America and JPMorgan Chase & Co. — have in recent weeks rescinded their predictions for a recession as data on economic growth have surprised to the upside, inflation has cooled and labor-market indicators have remained resilient.
Bloomberg Economics, though, is among those sticking by their recession calls, despite the broader shift in sentiment.
Paul, Wong and Winger pointed to signs typically seen early on in recessions, such as employers cutting hours, workers seeking multiple jobs to make ends meet, bankrupt firms laying off workers, and wages softening. “Once these dynamics start asserting themselves, they’re hard to stop,” they wrote.
Another key indicator to watch in the report is average hourly earnings. Wage growth has slowed this year, though in recent months it’s shown signs of stabilizing at rates above levels the Fed views as compatible with its 2% inflation target.
Average hourly earnings rose 4.4% over the last 12 months. In comparison, the fastest rate of wage growth achieved in the pre-pandemic economic expansion was 3.6%.
“With private-sector demand for labor softening, we expect month-on-month wage growth slowed to 0.2% in August” after advancing 0.4% in July, the Bloomberg economists said. “Annualized, that monthly pace would be consistent with the Fed’s 2% inflation objective.”
Wong, Paul and Winger expect the report will show the unemployment rate ticked up to 3.6% last month, while labor force participation remained unchanged at 62.6%. Their predictions are broadly in line with consensus estimates in a Bloomberg survey of outside forecasters.
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