Is the hot labor market strengthening or weakening? Or doing both at the same time?
The U.S. added 372,000 jobs in June while the unemployment rate remained at a low 3.6% for the fourth month in a row, the U.S. Bureau of Labor Statistics reported Friday. The strong employment growth surpassed many economists’ forecasts and indicated that demand for workers remains high.
But cracks are emerging in select spots. U.S. companies announced over 32,000 layoffs in June, a sharp increase from May and the highest monthly total since February 2021, according to global placement firm Challenger, Gray & Christmas. The deepest cuts were in the automotive sector, followed by entertainment-leisure and real estate.
“Employers are beginning to respond to financial pressures and slowing demand by cutting costs,” said Andrew Challenger, senior vice president of Challenger, Gray & Christmas. “While the labor market is still tight, that tightness may begin to ease in the next few months.”
The report tabulates announced layoffs and can serve as a proxy for developing trends. Many sectors increasing layoffs, for example, are dealing with a slowdown in the housing market, Challenger said. That was started by the Federal Reserve raising interest rates to combat inflation.
Some high-profile companies have embraced workforce cuts recently, including Netflix, Peloton, Coinbase Global and real estate firms Redfin and Compass. Others, such as Tesla and Meta (formerly Facebook), seem eager to push out some workers.
“I think some of you might decide that this place isn’t for you, and that self-selection is OK with me,” CEO Mark Zuckerberg told employees at Meta, according to The New York Times. “Realistically, there are probably a bunch of people at the company who shouldn’t be here.”
In Texas, companies have filed layoff notices for over 2,200 employees this year. In Dallas-Fort Worth, three companies recently filed layoff notices. In late June, First Guaranty Mortgage Corp. terminated 428 of 565 employees working at its Plano office.
“We’re seeing anecdotes and some evidence in the data that layoffs are starting to tick up,” said Mallory Vachon, senior economist at ThinkWhy, a Dallas-based software services company that focuses on the labor market. “But there’s just enough demand out there in the economy that workers aren’t staying unemployed for long.”
In May, Dallas-Fort Worth’s unemployment rate was 3.3%, down from 5.1% a year. D-FW has been growing jobs at a fast clip, adding nearly 295,000 positions in the 12 months ended in May. That’s roughly three times more net hires than in a typical month before the pandemic.
The strong hiring has continued despite growing headwinds. There are serious concerns about the effects of inflation and gasoline prices; the Fed’s interest rate hikes; constraints in the supply chain; and Russia’s invasion of Ukraine.
“There’s been a lot of talk about recession, and I think rightfully so,” Vachon said. “But the labor market clearly hasn’t gotten the memo.”
The June layoff announcements compiled by Challenger were 57% higher than in May, a meaningful increase. But the longer trend has been muted. For the first six months of the year, total announced layoffs were the lowest since the firm started tracking the data in 1993.
As the economy has recovered from the pandemic and employers have been eager to hire, layoffs nationwide have been running at their lowest rates ever. According to the BLS, companies cut just under 1.4 million positions in May, compared with nearly 2 million layoffs in the month before the pandemic.
Friday’s jobs report included a slight slowdown in the growth of average pay. Average hourly earnings rose 0.3% for a 12-month increase of 5.1%. That’s down from 5.6% in March.
Gasoline prices also have declined recently, offering more potential progress on inflation.
But June’s strong job gains underscore the Fed’s concerns about the tight labor market and support the view that the Fed will raise interest rates by three-quarters of a point later this month, said Lydia Boussour, lead U.S. economist for Oxford Economics.
Higher rates will soften consumer spending and lower profitability, and she expects that to reduce job growth significantly: “This should help bring worker demand and supply closer into balance,” Boussour wrote in an investor note.
She projects that companies nationwide will add an average of 160,000 jobs per month in the fourth quarter – less than half the average in June. In 2023, she projects monthly gains of just 65,000 jobs.
June’s job growth was led by professional and business services, followed by leisure and hospitality, and health care.
Those gains are good signs for Dallas-Fort Worth. Professional jobs have been booming for most of the pandemic, and the category has been a major contributor to D-FW’s growth – adding 113,000 jobs in the past three years.
Leisure and hospitality, which includes restaurants and hotels, finally recovered its pandemic job losses this spring, at least in D-FW. Nationwide, the category remains about 1.3 million jobs below its pre-pandemic level.
Health care jobs follow a similar track. They haven’t recovered fully nationwide, but D-FW has more workers in health care and social assistance than before the pandemic.
With job openings near a historic high, in both the U.S. and Texas, Vachon expects the growth to continue.
ThinkWhy ranks the 150 largest metros by job gains, net migration, wage growth, education and more. At the top of the list: Dallas-Fort Worth, followed by Austin-Round Rock.
“It’s just not letting up,” she said.
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