by Patrick Glynn
Update—September 18, 2024:
The Federal Reserve slashed interest rates by half a basis point to 4.75%-5%. It’s the first cut in interest rates since the start of the COVID-19 pandemic.
“In considering additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” the Federal Reserve said in a statement.
In commenting on the August jobs report below, Lawrence Dearth said, “Just because you start seeing rates decreasing does not mean that all of a sudden every company is going to post their Now Hiring signs,” suggesting that those who don’t immediately transition to hiring mode should focus on worker productivity and retention.
The Bureau of Labor Statistics on Friday reported the U.S. economy added 142,000 jobs, slightly below expectations. The unemployment rate dropped from 4.3% to 4.2%.
“It’s a healthy labor market” at the macro level, said Lawrence Dearth, Insight Global’s President of Recruiting, though he says the story on an individual level changes by industry and location. High-level white-collar jobs, for example, have experienced more volatility over the last 12 months.
However, Jerome Powell, the Federal Reserve chairman, said last week that “the labor market is no longer overheated,” and “it seems unlikely that the labor market will be a source of elevated inflationary pressures anytime soon.” That’s good news for inflation watchers.
The August 2024 jobs report only reinforces that positive sentiment with moderate job gains, an unemployment rate that dropped slightly, and wages increasing 3.8% year-over-year.
Some other economic data reported over the last couple of weeks include:
- The sectors with the most job growth this month are construction (+34,000), healthcare (+31,000), social assistance (+13,000), and finance (+11,000).
- July’s jobs number was revised downward to just 89,000 jobs. Job gains across the previous 12 months were revised downward by over 800,000 jobs.
- The private sector added 99,000 jobs, according to ADP. It’s the fifth month in a row with a slowdown in private sector hiring.
- New jobless claims are the lowest they’ve been in eight weeks (227,000). Layoffs remain steady and at typical levels.
- The Consumer Price Index (CPI) inflation measure increased 2.9% year-over-year, and the Personal Consumption Expenditures (PCE) index increased 2.5%. Both numbers are the lowest since the first half of 2021 before inflation began to spike.*
Looking ahead, the Federal Reserve is expected to cut interest rates at their September meeting for the first time since the start of the COVID-19 pandemic in 2020. The debate is likely now how much they will cut rates—not if.
Though businesses have looked forward to the interest rates dropping, Dearth says that rate cuts likely won’t immediately affect hiring across the board.
“I think the Fed has been very outspoken about not wanting to re-trigger inflation too quickly,” Dearth pointed out. “And I think that when they cut rates, it will be partially because they have confidence of a slow and steady uptick in investment—not a dam breaking.”
“Just because you start seeing rates decreasing does not mean that all of a sudden every company is going to post their Now Hiring signs,” he said, noting that those who don’t immediately transition to hiring mode should focus on worker productivity and retention.
However, if employers are in a good place to hire following action from The Fed, Dearth says now is a great time to go after talent. There are still more job openings than unemployed job seekers. And though passive job seeker confidence is seen as low, reflected by quit rates as low as 2%—the lowest level we’ve seen in the last eight years—Dearth says, “there are a lot of people who have been unemployed for six to 12 months who are very capable and very good at what they do.”
*The CPI focuses on households. It tracks how much more a loaf of bread costs you at the grocery store from last month to this month. The PCE index looks beyond household expenses to what businesses, hospitals, and schools buy. So, if the price of medical supplies goes up, it impacts the PCE.
by Alexandra Woodford 
