Good News from Temp Jobs?
Over the past few weeks, we have mentioned in our Outlook that employment in the US is as tight as it has been in decades. Indeed, the unemployment rate has not been this low since the late 60’s. The tight labor market has led to significant wage pressure, which is a major part of the inflation that we are all experiencing. We note two quotes below that we think are important. The first is from a US Fed member and shows the FOMC’s commitment to low inflation and strong employment. The next quote is from the CFO of Ziprecruiter and he clearly says the job market is slowing.
- “We are absolutely committed to getting back to 2% over the next few years. Although goods prices have come down in last several months, there are signs this may not go as quickly as hoped. We have demand that exceeds supply, the labor market is extraordinarily strong. Monetary policy must bring demand and supply back into balance. Don’t want to allow inflation expectations anchor to slip.” – New York Federal Reserve Bank President John Williams
- “I just want to start by saying some things as plainly as possible, which is, clearly, we’re in a macroeconomic slowdown. And online recruiting has effectively cooled across the country…. Employers have been decreasing their willingness to pay for hires, and many companies are executing layoffs as they tighten budgets. Rather than showing a more typical seasonal rebound from the lows of the December holiday period, we saw online job postings in our marketplace remain depressed.” – Ziprecruiter (ZIP-US) CFO Timothy Yarbrough
Figure 1 presents temporary jobs and total employment for US workers for just under the past 25 years. The main take away for us is that the temporary job market turns well ahead of the overall employment. It appears, anecdotally from the quotes above and the data in the chart, that this could be starting to happen. It does makes sense that as the business cycle matures, the demand for temporary workers wains and then ultimately overall unemployment increases. This should, in theory, have a dampening effect on inflation
“This means that” we will continue to watch this data very closely. In the past, a turn in total employment has resulted in a recession. This has been true in almost every case since 1940. This cycle has been very different than others because of the impacts of the pandemic, lockdowns and resulting stimulus. We are in somewhat uncharted territory
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