Are Cracks Appearing in the Labor Market?

Leo Wealth

Written by Christos Charalambous, CFA

As we progress through 2024, the labor market’s trajectory remains a focal point for economists, policymakers, and businesses alike. The outlook is shaped by several leading indicators that provide insight into potential shifts in employment dynamics. These indicators, including job openings, the worker quit rate and business & consumer confidence indices, offer a comprehensive picture of what to anticipate in the coming months.

Firstly, the trend in job openings, as reported by the Job Openings and Labor Turnover Survey (JOLTS), indicates decelerating demand for labor. As of March 2024, U.S. job openings have declined to 8.5 million from a cycle high of 12.2 million in March 2022. As such, companies are hiring less and posting fewer new job openings, which may explain why a dwindling number of workers are quitting their jobs. The quit rate has decelerated from a cycle high of 3.0% to 2.1%; the latter reading is just above the long-term average of 2.0%. The lower job openings dynamic is also reflected in the increasing ‘jobs hard to get’ responses in the Conference Board’s Consumer Confidence survey.

Secondly, business confidence indices, such as the National Federation of Independent Business (NFIB) Small Business Optimism Index, provide valuable insights into employer sentiment and hiring intentions. We note that 80% of total employment in the U.S. economy is outside the S&P 500 companies and current NFIB readings indicate that private sector constituents are starting to worry about sales and their hiring plans have been declining. Weaker hiring intentions are consistent with a higher unemployment rate by the end of 2024, which is currently at 3.9%, above the cycle low of 3.5%. We also note that according to the Sahm Rule Recession Indicator the early stage of a recession is signaled when the three-month moving average of the U.S. unemployment rate is 0.5% or more above the lowest three-month moving average unemployment rate over the previous 12 months.

In conclusion, the U.S. labor market demand for the rest of 2024 appears to be softening due to decelerating job openings and lower hiring intentions. We expect the job-workers gap (the excess of job openings over unemployed workers) to normalize i.e. for the labor market to shift to a surplus by early 2025. This outlook points to lower wage inflation readings in the quarters ahead and a shift back in market expectations for more interest rate cuts by the Federal Reserve. As such, from a bond allocation perspective, we favor increasing duration in Treasuries.


The information provided is for educational purposes only. The views expressed here are those of the author and may not represent the views of Leo Wealth. Neither Leo Wealth nor the author makes any warranty or representation as to this information’s accuracy, completeness, or reliability. Please be advised that this content may contain errors, is subject to revision at all times, and should not be relied upon for any purpose. Under no circumstances shall Leo Wealth be liable to you or anyone else for damage stemming from the use or misuse of this information. Neither Leo Wealth nor the author offers legal or tax advice. Please consult the appropriate professional regarding your individual circumstance. Past performance is no guarantee of future results.

This material represents an assessment of the market and economic environment at a specific point in time. It is not intended to be a forecast of future events or a guarantee of future results.

Indices are unmanaged and investors cannot invest directly in an index. Unless otherwise noted, performance of indices does not account for any fees, commissions or other expenses that would be incurred.  Returns do not include reinvested dividends.

The U.S. consumer confidence index (CCI) is an economic indicator published by The Conference Board to measure consumer confidence, which is defined by The Conference Board as the degree of optimism on the state of the U.S. economy that consumers are expressing through their activities of savings and spending. Global consumer confidence is not measured.

The National Federation of Independent Business (NFIB) Small Business Optimism Index is a composite of ten seasonally adjusted components. It provides an indication of the health of small businesses in the U.S., which account of roughly 50% of the nation’s private workforce.

The Standard & Poor’s 500 (S&P 500) Index is a free-float weighted index that tracks the 500 most widely held stocks on the NYSE or NASDAQ and is representative of the stock market in general.  It is a market value weighted index with each stock’s weight in the index proportionate to its market value.

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