Jack Otter and the Barron’s Roundtable panel discuss why job gains were lower than expected in April.
US Labor Market Hiring is stabilizing after months of rapid job growth, but some workers are feeling the slowdown more than others.
Recent Data According to a Vanguard survey, demand for high-income workers is declining, creating a two-tiered job market in which hiring of blue-collar workers is booming but hiring of white-collar workers is sluggish.
The employment rate for the lowest-income earners (those earning less than $55,000 a year) remains above pre-pandemic levels at 1.5%, but the employment rate for those earning more than $96,000 has slowed to just 0.5%, less than half the peak recorded in mid-2022, according to the report, which is based on new enrollments in Vanguard 401(k) plans.
This marks the lowest employment rate for high-income workers since 2014, excluding the big drop during the pandemic.
Job openings unexpectedly fall to lowest level in three years
More than 75 employers were accepting resumes and interviewing potential new hires at a job fair in Lake Forest, California, on February 21, 2024. (Paul Barsebach/Media News Group/Orange County Register via Getty Images/Getty Images)
“This partly reflects that low-wage service industries are still trying to recover from the coronavirus shock, which will be difficult as many of these workers have moved on to higher-wage jobs,” said Adam Sickling, senior economist at Vanguard.
There are several reasons why companies are hiring so few white-collar workers today.
The number of high-paying jobs is declining
Julia Pollack, chief economist at ZipRecruiter, told Fox Business that some companies, such as tech companies, have rushed to hire during the pandemic. But Economic normalization As Americans returned to in-person activities, companies laid off large numbers of employees and stopped hiring new ones.
A separate analysis by Challenger, Gray & Christmas found that tech companies cut more than 47,000 jobs in April, down 58% from the roughly 114,000 cuts announced in the same period last year.
“The economy seems to be in a bit of a recession. The white-collar sector, while not shrinking overall, is very weak. [aren’t] “Neither is growing,” Pollack said. “The white-collar sector is stagnating.”
Participants in a job fair held at Bolivia Community College in North Carolina on April 20, 2023. (Alison Joyce/Bloomberg via Getty Images/Getty Images)
Rising interest rates are forcing some companies to put riskier investments on hold. Federal Reserve He said he would cut interest rates from their current 23-year high. Central bank officials have signaled they will start cutting rates later this year but have warned they need more evidence that inflation is heading back toward their 2% target.
Another reason for the decline in employment is that many Americans with high-paying jobs are choosing to stay put.
“Part of the reason for this is the rise of flexible and remote working. When a given company switches from working in an office to working remotely, they often see turnover drop by more than 30%, meaning companies are reaping the employee retention benefits of more flexible working,” Pollack said.
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The labor market has been historically tough over the past year, defying the expectations of economists who have predicted an economic slowdown and expect it to continue to cool in coming months as rising interest rates push the economy along.
The Federal Reserve has raised interest rates 11 times since March 2022 in an effort to tame inflation and cool the labor market. Policymakers have suggested that rapid wage growth, a product of a robust labor market, contributed to the inflation crisis that has ravaged the wallets of millions of Americans over the past few years.
