
Why the labor market is “standing over a cliff”

We got the latest data on a key part of the national labor market Tuesday in the Job Openings and Labor Turnover Survey, or JOLTS. The report showed that job openings decreased to 7.6 million in December, while the hiring and quits rates remained unchanged. The January employment report will be released Friday.
Kathryn Anne Edwards, a labor economist and independent policy consultant, wrote about the hiring rate for Bloomberg in a recent article titled “The American worker has lost all leverage.” She and “Marketplace” host Kai Ryssdal talked about her read on the labor market, and the following is an edited transcript of their conversation.
Kai Ryssdal: The labor market, as most anybody who is even passingly familiar will tell you, seems pretty good. You differ, I guess?
Kathryn Anne Edwards: The unemployment rate is certainly good, but it is not predicting, I would say, strength in every other indicator that we have of the labor market.
Ryssdal: You like this thing called the hiring rate. What is it? And why do you like it?
Edwards: The hiring rate measures how many workers are being hired into the labor market. I think the number itself probably means nothing to people. If I were to tell you the hiring rate is 3.3, it’s not flashing across Times Square. It’s really just the relative movement of hires lets you know whether or not firms are expanding their workforces.
Ryssdal: So put that into context, right? One of the things you point out in this piece, and we’ve said actually through a good part of the pandemic, is a key part of the labor market, in terms of workers having power, is their ability to leave their jobs with confidence that they can get another one.
Edwards: Exactly. And when we were coming out of the pandemic, we called it, you know, the “great resignation,” the “great reshuffle.” But that was the peak of the hiring rate in the U.S., that so many workers were changing jobs, moving to different jobs, and that’s associated with wage growth. If you can’t have that outside offer, if you don’t have that leverage, not only can you not leave, but you can’t bargain for higher wages as easily. That outside offer is a really important part of you being able to ask for more.
Ryssdal: That word you just used, “leverage.” It’s the headline of this piece, and writers obviously don’t get to choose their own headlines, but the headline of this piece is “The American worker has lost all leverage in the job market.” And that’s going to strike some people, because for a long time, in the beginning of the pandemic, it was the workers have all the leverage, right? Even as recently as, I don’t know, a year, 18 months ago.
Edwards: It was certainly a seller’s market, and one that was very beneficial for a lot of American workers and their families. But you know, their power has shifted. And it’s not as if we don’t know what’s going on or if there’s some mystery that we have to unravel. The [Federal Reserve] through raising interest rates has been trying to weaken the economy in order to relieve the upward pressure on prices. Every economist worth their salt, and I’m sure you had someone on your program say we’re going to have to get the unemployment rate to 6% to really bring prices down. They were all proven wrong. But that’s not to say the labor market has been unscathed, and where you see the weakening of the labor market is on the hiring side. That is a weakness in the labor market. It’s not a high unemployment rate, but it’s not nothing.
Ryssdal: With the acknowledgement that you’re a labor economist and not a media critic, do you suppose we’re covering the labor market wrong?
Edwards: Why Kai, I would never! No, I think it’s hard to connect all of the pieces of the labor market together and see not just where we’re standing, but the direction we’re facing. And if the media struggles with it, economists do too. What I think is the truest thing about the economy right now is that nobody feels like we’re normal again. It’s been five years and we’re still not normal. We’re not hiring like normal. We’re not seeing wages like normal. We’re not seeing the same type of investment decisions, and at the same time, you know, we’re still watching price reports with bated breath. So what I tell people is that on some level, you can imagine the labor market is kind of standing over a cliff with a strong wind at its back. I mean, it hasn’t fallen over, but it’s not in a good place, and the kind of evidence of its insecurity is just this precipitous decline in hiring. And just to make it clear that I’m not trying to, you know, maybe be dramatic — who would ever accuse an economist of that? — but you know, in the Great Recession, hiring fell 1.3 points. The decline in hiring that we have seen is the exact same.
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