‘The available evidence points to continued deteriorating in the labor market,’ economist EJ Antoni stated.
As the U.S. labor market slows, underlying trends in the data indicate that a larger share of jobs are going to foreign-born workers, while heightened uncertainty among employers is causing them to stop hiring.
According to
data released last week by the Bureau of Labor Statistics (BLS), the U.S. economy added 142,000 new jobs in August, which was less than consensus estimates of 160,000. In addition to falling short of projections, BLS jobs data has been subject to revision. In August, the BLS stated that there were 818,000 fewer jobs in March than it had initially reported.
“Labor demand has been trending down since March 2022, when it was artificially high following disruptions in the economy related to COVID and government interventions,” EJ Antoni, an economist at The Heritage Foundation, told The Epoch Times.
For many Americans, this means that the abundance of job opportunities they had recently enjoyed may be coming to an end.
“Firms are increasingly shifting away from full-time employment to part-time, while also not replacing job leavers but instead eliminating positions,” Antoni said.
“There is no significant indication that conditions are going to improve anytime soon. In fact, the available evidence points to continued deteriorating in the labor market.”
However, while many economists saw indications of a coming recession in recent employment data, some saw reasons for optimism.
“[The labor market] is cooling, but it’s not cracking,” Fred Ashton, director of competition policy at the American Action Forum, a nonprofit research organization, told The Epoch Times.
“We’re not seeing any uptick in layoffs, which would be very worrisome,” Ashton said. “It’s just a slowdown in hiring reflective of the long and variable lags of tight monetary policy.”
He said there currently is heightened uncertainty among employers with the upcoming election regarding what policies an incoming administration will pursue on taxes, regulations, and other issues.
This has caused many companies to pause new hiring until they get a clearer view of what the future may hold.
More Jobs for Immigrants
According to BLS data, the number of foreign-born workers in the U.S. labor force increased by 1.3 million, while the number of native-born workers decreased by 1.3 million. The labor-participation rate—which measures the number of employed relative to the number of working-age people—rose by 0.2 percent for foreign-born workers, while the participation rate fell among native-born Americans by the same percentage. The BLS definition of foreign-born workers includes those who entered the country legally and illegally. The labor participation rate for native-born Americans fell during the COVID-19 pandemic, and many of those jobs have since been filled by foreign-born workers, though that trend may be starting to slow.
“We’ve seen [native-born] prime-age workers’ labor-force participation rebound in the last six months or so, back to pre-COVID levels, which is very encouraging,” Ashton said.
“But it really has been the immigrant population that has been the biggest supplier of labor.”
The more rapid employment growth among non-native-born Americans is a trend that has been occurring for some time, though it has accelerated in recent years.
The ‘Great Resignation’
An August report by the U.S. Chamber of Commerce stated that “the COVID-19 pandemic caused a major disruption in America’s labor force—something many have referred to as the ‘Great Resignation.’”Approximately 130 million Americans quit their jobs between 2021 and 2023, the report stated. Rather than exiting the labor force entirely, many workers switched to other jobs, seeking a better work/life balance or higher pay.
While quit rates have remained high in 2024, hiring rates have remained high as well, until recently.
According to the FlexJobs 2024 State of the Workforce Report, which surveyed more than 3,000 professionals, 67 percent of respondents said they plan to change jobs in the next six months.
When asked what employers could do to keep them, workers said higher pay (38 percent), remote work (34 percent), and improved workplace culture (33 percent).
Other takeaways from the survey included that 46 percent of respondents said the job market is worse today than a year ago; 35 percent said they know someone who is planning to quit because an employer required them to return to the office; and 57 percent said they would seek a new job if they were not allowed to work remotely.
One possible silver lining to the slowdown in hiring may be that the productivity of the American worker is increasing.
The BLS reported on Sept. 5 that non-farm labor productivity increased by 2.5 percent during the second quarter of 2024. During the same period in 2023, productivity increased by 2.7 percent.
Labor productivity, measured in terms of output per hour, is calculated by dividing an index of real output by an index of hours worked by all workers. Increases in worker productivity could lead to future increases in real wages, for those who have jobs.
Many states have attempted to drive up wages by decree via minimum wage hikes, although critics say this will lead to fewer jobs.
According to the Economic Policy Institute’s minimum wage tracker, while the federal minimum wage has not increased from the rate of $7.25 per hour since 2009, 29 states and the District of Columbia now have a minimum wage greater than $10 per hour. In addition, states including California, Connecticut, Maryland, Massachusetts, New Jersey, New York, and Washington, as well as the District of Columbia, have a minimum wage of $15 per hour or more.
This could lead some industries, particularly restaurants, to hire fewer workers, limiting opportunities for low-skilled workers to enter the labor force. A February 2023 survey by the National Restaurant Association found that 58 percent of restaurant owners planned to use more automation in the coming years to reduce the need for human workers.
More Pressure to Cut Rates
Many economists expect that a weaker jobs market will put more pressure on the Federal Reserve to step back from its attempts to reduce inflation and cut interest rates to spur the economy. While speaking on Aug. 23, Fed Chairman Jerome Powell stated that “four and a half years after COVID-19’s arrival, the worst of the pandemic-related economic distortions are fading,” adding that “inflation has declined significantly.”
His speech, which was made days after the downward revisions in the BLS labor statistics, indicated that the Fed is likely shifting its priorities from fighting inflation to boosting employment.
“It seems unlikely that the labor market will be a source of elevated inflationary pressures anytime soon,” Powell said. “We do not seek or welcome further cooling in labor market conditions.”
The federal government has taken on a much larger role in the U.S. economy since the COVID-19 pandemic. Ostensibly to slow the spread of viral infections, most U.S. states implemented mandates to close businesses and encouraged or forced people to stay at home, while the Federal Reserve bought trillions of dollars worth of Treasury bonds to pump cash into the economy.
While the pandemic has abated, the Fed continues to hold more than $7 trillion in Treasury bonds and mortgage-backed securities and to dominate financial markets due to its sheer size.
“It does appear that we’re headed into a recession, and might be in one already, but that has become a very difficult call to make in a post–pandemic world where so many economic metrics have become unreliable due to the violent government interventions that began in 2020 and continued for a couple of years thereafter,” Antoni said.
