The markets have been waiting for the labor market to show some cracks before really worrying about a potential recession. This past week, we got some indications that things might finally be trending in that direction. The ADP payroll number for August came in well below expectations, while job openings dropped to their lowest level in 2½ years.
Nonfarm payrolls beat modest expectations in August, but the unemployment rate also ticked up to 3.8%, its highest reading since January 2022. The numbers don’t yet indicate that something’s breaking, but the trend towards a cooling jobs market sure looks like it’s firmly in place. Prior recessions have come with sustained periods of significant job losses and we still have a long way to go to get to that point, but it looks like the great resignation has ended and conditions have become much more normalized.
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