The job market reaches a tipping point as the hiring boom takes a breather

9-to-5 freeze… After a years-long postpandemic hiring frenzy, the US labor market is cooling. In July, employers added just 114K new jobs — way fewer than economists expected. Oh, and the unemployment rate spiked to 4.3%, the highest level since 2021. Adding to the job jitters: this month the Labor Department said the US added 818K fewer roles than originally reported for the year ended in March. Hourly wages have outpaced inflation since the pandemic, but Americans are craving higher pay as living costs soar. Still, a weaker job market is partly why traders are certain the Fed will cut rates this month.

Connecting the dots… After mass layoffs last year, job cuts made headlines again this year. Companies including Microsoft, Google, Nike, and IBM have all slashed positions, exacerbating a white-collar slowdown. Gaming cos like Take-Two, EA, and Epic have laid off more people this year than in 2023 and 2022 combined. Meantime, job hoppers are seeing smaller pay bumps than two summers ago, when a flood of open positions gave candidates the advantage. Now, more workers are staying put: quit rates and hiring rates have fallen below prepandemic levels.

• Don’t apply here: The slowdown has also made it harder for new grads to find entry-level gigs. Hiring projections for the class of 2024 were down ~6% from last year. Meanwhile, boomers are unretiring.

Looking ahead… The weakening job market has sparked recession fears. Still, jobless claims dipped last week and the US economy grew faster in Q2 than initially reported, boosting hopes of a soft landing. Plus, the Fed’s expected rate cuts could revive hiring. At Jackson Hole last month, Fed Chair Powell said "we do not seek or welcome further cooling in labor market conditions."