The United States is in unchartered economic territory, a historic labor market with very low dynamic hiring and firing rates. Right now, economic specialists from all sides are freaking out over a lack of job growth. It’s going at one of the fastest snails’ pace we’ve seen in the last 20 years. Latest data indicates that job gains have averaged just 55,000 and that’s per month. This stagnation has recently led to a debate about the reasons why.
Tyler Schipper, an associate professor of economics at St. Thomas University in St. Paul, Minnesota, explores the uncertainty inherent in monetary policy. He sounds the alarm that this uncertainty is having tremendous consequences on the labor market. The unemployment rate has ticked up as a result of more people coming into the labor force and not being able to find work. Economists are betting on cuts to interest rates from the Federal Reserve to reaccelerate hiring in the months ahead. They caution that it often takes three to five quarters for these policy changes to translate through the economy.
Factors Contributing to Labor Market Weakness
There are a number of reasons behind this weak labor market. As the huge Baby Boomer generation continues to retire, the labor supply is not just stable, but it’s getting smaller by the day. Moreover, constraints on states’ immigration policies compound this problem. For that, we can defer to Cory Stahle, an economist at Indeed Hiring Lab on the deep uncertainty’s business-sucking vibes.
“There’s uncertainty around what rates are going to do, uncertainty around prices, uncertainty around general policy.” – Cory Stahle
Stahle adds that this lack of clarity creates a situation where companies are afraid to commit to hiring. Lastly, he adds that as long as this uncertainty remains up in the air, companies are doomed to keep treading water in a difficult ecosystem.
“Unless that fog of uncertainty is broken, we’ll continue to see companies stumbling a little bit through that fog.” – Cory Stahle
Seema Shah, the chief global strategist at Principal Asset Management, says it cuts to the core of the matter. Wage dynamics Finally, the long-term effects of these labor displacements are unknown. As economic conditions continue to change around them, businesses are finding it increasingly difficult to keep up in a rapidly changing environment.
The Impact of Policy and Economic Trends
Tyler Schipper asks all the right questions about what it will take to have a true labor market comeback. He in this post that many of these conditions are policy-related, it’s a long and ongoing battle.
“The question I ask myself is, ‘What would be the conditions in which I think the labor market would ramp back up?’ and some of those are policy-related.” – Tyler Schipper
Schipper isn’t optimistic that these challenges will be addressed in short order. He argues that companies need to be ready to sail into a dark sea of uncertainty.
“I have a hard time seeing those resolving themselves anytime soon.” – Tyler Schipper
In his warning of the current economic landscape leading to a K-shaped recovery. Under this alternative, some sectors will grow and others will decline at differing rates.
“For better or worse, I think we could be in this K-shaped economy for some time.” – Tyler Schipper
Future Outlook for Job Growth
The outlook for job growth remains cautious. Hiring is not entirely at a standstill, notes Dan North, Allianz Trade’s senior economist for North America. It’s waiting in the wings as workers continue to grip their jobs with an iron fist.
“Hiring, while certainly not on a freeze, is on hold; and people that have jobs are absolutely holding on to them with white knuckles.” – Dan North
As businesses grapple with economic uncertainties and policy constraints, experts believe that the labor market may require a recession before it can stabilize and improve. This upcoming recession would be devastating for millions of Americans who depend on consistent work to support their families.