The current labor market, in charts

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This week is all about the labor market! With the jobs report coming out tomorrow, let’s dive in and get a state of play on where things stand. 

My favorite way to get a high-level pulse on the labor market is taking a look at Atlanta Fed’s labor market spider chart:

Compared to both one year ago and to the pre-Covid trend, we can glean a few general trends:

• The private sector is quite weak and continues to be. Hiring rates are very low, causing people to hold onto their jobs and avoid quitting at all costs.
• Wage growth, one of the key drivers of the huge inflation we saw in 2021-2022, continues to soften as the labor market returns to being in balance.
• Generally, it’s a bad time to look for a new job, but as long as you don’t quit, it’s unlikely you’ll be laid off either.

With the stage set, let’s dig into all the labor market data we’ve received this week.

JOLTS

On Monday, we received the JOLTS report for April, which came in quite strong.

Job openings rebounded higher to 7.39 million, above consensus expectations of 7.10 million.

However, when contrasting it to higher-frequency data like Indeed Job Postings, this is likely to be an outlier bounce higher that is likely to return to a downward trend next month.

One of the key insights for understanding slack in the labor market is comparing the number of job openings to unemployment. 

One of the big reasons the Fed was able to hike so aggressively in 2022 without hurting the labor market is because the huge amount of job openings acted as a buffer so that the unemployment rate wouldn’t tick up. The Beveridge curve is the best way to view this dynamic. 

As we can see from this week’s print, we held steady at the low end of the job vacancy rate where there’s just enough slack in the labor market to avoid an acceleration in unemployment:

Claims data

Today we received the claims data, which provides one of the more high-frequency labor market data points we can see every week. 

Interestingly, continuing claims — which saw a new cycle high last week — were revised lower and are now back within the range:

Finally, we receive the jobs report tomorrow, which will provide a good look into how the labor market is digesting the impact of tariffs:

Overall, according to this week’s data, a picture of a labor market that remains on thin ice emerges. 

Not quite bad enough to crack the ice — but still strong enough to hold up the economy.

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