The U.S. labor market has shown signs of stability amid economic turbulence, with recent data indicating a nuanced picture of supply and demand dynamics. In 2024, immigration emerged as the primary contributor to positive labor supply growth, even as native-born labor supply growth stalled. The unemployment rate edged down to 4.1%, aligning closely with full employment estimates. Despite the pause in the cooling trend, the labor market remains well-balanced, according to various indicators.
A substantial downturn has led to over $734 million in total liquidations, with $152 million specifically in Bitcoin. This financial backdrop coincides with key developments in the labor market. The Purchasing Managers' Index (PMI) employment indices reflect increasing employment across various sectors, highlighting a buoyant demand for labor. However, the weakening growth in labor supply presents potential risks, impacting both sides of labor market stability.
Immigration has played a significant role in sustaining the labor supply, with undocumented workers accounting for 73% of the past year's net immigration. Though the influx of undocumented immigrants saw a slowdown in the second half of 2024, their contribution remains pivotal. Strong labor supply growth was instrumental in the U.S. economy outperforming expectations last year, but tighter labor supply conditions could exert upward pressure on labor costs, potentially reigniting inflation concerns.
The Atlanta Federal Reserve's recent estimations reveal that job switchers are no longer experiencing unusually high wage increases, suggesting a moderation in wage inflation pressures. This is further supported by the U.S. Producer Price Index rising by less than anticipated in December, indicating subdued inflationary pressures. Wage growth also declined to 0.28% month-over-month on a seasonally adjusted basis in December, with the yearly measure standing at 3.9%.
Job openings have climbed to their highest level since May 2024, with the ratio of unfilled vacancies per unemployed individual remaining stable, close to pre-pandemic averages. This suggests a resilient demand for labor despite challenges in supply dynamics. The interplay between a robust demand for labor and a constrained supply could shape future economic conditions.