There’s a worrying trend beneath the latest employment statistics — the job-finding rate has cratered over the past two months.
An important note here: The job-finding rate is a bottom-up statistic, calculated by estimating which types of workers got or lost jobs in a given month, going by industry and demographic microdata from the BLS’s Household Survey. Our description might oversimplify the methods used in the 2005 paper where UChicago’s Robert Shimer developed this idea, but it’s the week before Christmas and the baby still isn’t sleeping through the night.
Also, somebody at Goldman Sachs has done the statistical work for us. So on we go! Their chart of the aggregated data doesn’t look promising:
Yikes! That’s the biggest two-month decline since Covid-19. The bank softens the blow by providing a few reasons to avoid panic.
One is the “Mass Deportations Now” thing:
First, there was a large decline in the job-finding rate of foreign-born workers, which fell roughly 10pp over the last couple of months and accounted for about 2pp of the overall decline in the job-finding rate. We suspect that heightened uncertainty over immigration policy under the incoming Trump administration may have made employers more reluctant to hire these workers. That said, these breakdowns are volatile at a monthly frequency and previous swings in the foreign-born series have sometimes reversed in later months.
The chart of this shows some volatility, but it’s tough to find comparable declines outside of Covid times:
Also, it’s not like it was a one-to-one trade-off where the job-finding rate soared for US-born workers.
But hey, let’s move on to the next reason Goldman provides to maybe not worry. That’s the weird timing of the US’s Thanksgiving holiday this year.
Because the holiday came at the very end of November, it’s possible that retail hiring for Black Friday didn’t start until later in the month, which could have suppressed the job-finding rate for workers in the “trade and transportation” industries. (It’s cool that the “trade and transportation” industries include jobs where you fold shirts as a teenager.)
Here’s the chart:
GS points out that the late holiday dragged down the job-creation numbers by 28,000 for November. It also says that strikes could have affected the transportation industry job-finding figures, while acknowledging that “striking workers are not supposed to be counted as unemployed in the household survey”. Hm.
Anyway, as the final mitigating factor, Goldman’s economist Manuel Abecasis points out that more Americans are retiring instead of finding jobs:
So older workers losing their jobs and simply choosing to retire instead of continuing to job-seek is supposed to be a . . . good sign? Well, not really:
These three factors explain around 5pp of the 7pp decline in the job-finding rate since September. As a result, our analysis suggests that much of the recent decline in the job-finding rate can be explained by special factors unrelated to cyclical weakness in labor demand. Even so, the steady decline in the job-finding rate over the last year is consistent with a labor market that has loosened significantly in 2024 and has yet to stabilize.
And all of this assumes these three factors aren’t actually related to the broader economy. But it’ll be January before we learn how much the late Black Friday mattered, and the Fed’s probably going to cut today, so long live the FIWB rally.
Further reading:
— Stocks are expensive and nobody cares
