US Sees Lower Recruitment Ads in Latest Challenge to Jobs Market — Brace for Recession?

Key Takeaways:

  • The job market shows signs of plateauing.
  • Should the next labor report show a cool-off, the Fed could ease up on QT measure and adopt a dovish approach.
  • As of early March, the Fed intends to continue with interest rate hikes.
Unemployment rate under the glass
US Sees Lower Recruitment Ads in Latest Challenge to Jobs Market — Brace for Recession?

YEREVAN (CoinChapter.com) – The US labor market has seen a robust boost in 2023, with declining weekly initial jobless claims throughout early February. However, the changing tide of the job market could pit the economy into a recession, given the continuous interest rate hikes from the Federal Reserve. Here’s why.

The job market risks another slide in March.

The Covid-19 pandemic influenced the job market greatly, and the ripples of the effect were still strong in 2022. The ubiquitous lockdowns initiated a trend known as the Great Resignation, where millions of people rethought their employment and voluntarily left their jobs. Approximately 4.5 million employees quit only between Q1 and Q3 2022.

Quitting en masse has slowed down as of early 2023, says Anthony Klotz, an associate professor of management at the University College of London, noting improvements in employee turnover.

However, according to statistics from large online recruiters ZipRecruiter Inc. and Recruit Holdings Co., the number of job postings on their sites in late 2022 declined more than the Labor Department report on job openings for that period indicated.

Moreover, several large employers reported a drop in available jobs in 2023, potentially foretelling a decrease in openings in coming Labor Department reports and a slowdown in hiring this year.

Notably, the dissonance between the government reports and the recruitment data could obscure the clarity of the Federal Reserve’s policy decisions, as the lawmakers rely on the Labor Department statistics to determine the interest rate increase.

Federal Reserve continues to hike interest rates.

Generally, interest rate hikes are a tool for the Fed to control runaway inflation. By increasing borrowing costs, the government discourages business growth, slows down the economy, and curbs inflation.

Meanwhile, the interest rate hikes also risk sending the economy into a recession, as many experts have feared since 2022. In detail, the US lawmakers kept their anti-inflation policies in high gear last year, delivering three consecutive interest rate hikes, three-quarters of a basis point each. However, curbing inflation allowed for a more dovish approach, and the policymakers agreed on 25 bps hikes henceforth.

Quincy Krosby, the chief global strategist for LPL Financial, said Fed still has a long way to go, recalling that “it took them a long time to acknowledge that inflation was stickier than they initially assessed.”

This is not to criticize them but to understand: They do not know more about inflation than the average consumer. That’s important. It’s just that it’s their job to know. And that’s where the criticism comes in.

he added.

Benson Suet, Business Development & Strategic Partnership at Coinstore.com, agreed, underscoring the importance of the upcoming inflation report.

For a risk-on market, inflation has to come down progressively. The market will be sensitive to the upcoming CPI report. If inflation is sticky at 6%, it means Fed has to hike higher interest rates to bring the inflation down.

he told CoinChapter.

Job market influence on Fed decisions

The job market is one of the key economic markers for Fed officials regarding interest rate hikes. When the labor statistics show a downtrend in employment, the Fed might pause the quantitative tightening to avoid recession.

As mentioned, the robust government data on job openings and hiring are among the reasons Federal Reserve officials believe the US economy is overheated, fueling high inflation. Moreover, recruiting-company figures on available jobs are more timely than government reports. Unfortunately, the latter lag by about a month, making a timely inflation prognosis more challenging.

Fed officials could feel less pressure to move aggressively if government reports align with the recruitment business.

Experts believe the job market is cooling off.

Julia Pollak, the chief economist at ZipRecruiter, said overhiring is among the largest roadblocks for employers as of early March 2023.

We’re seeing a pretty large pullback almost everywhere except personal-care services and healthcare. But even those businesses are cautious and nervous and they’re being quite conservative. They’re mostly hiring for replacement and not head count growth

said Pollak.

The cautious approach and pullback from employers mean the statistics in the next Labor Department report might back the job market cool-off.

If so, the Federal Reserve could adopt a more dovish approach. However, the thin line between curbing inflation and avoiding recession might be too much of a task for lawmakers. Thus, as the official numbers don’t reflect the real picture of the job market, the recession risks persist.

Also read: US new home sales jump to a near-year high – what does it mean?

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