Three Leading Indicators Within the Labor Market

Last Edited by: LPL Research

Last Updated: October 09, 2023

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Jeffrey Roach (00:02):

 

Hi, and welcome to the latest edition of the LPL Econ Market Minute. Here are three things about the labor market that investors need to think about. First, the ratio of part-timers in the job market tends to go up in recessions. You can see in the chart that the ratio of part-timers to full-timers is up above the near-term lows from June last year. Now, of course, during the longest expansion in the United States history, which dates from mid-2009 to just before the onset of the global pandemic, job growth was quite good, and the vast majority of those who were interested in work were able to get full-time work. So you see, right now, you can see some warning signs from the low but increasing ratio of part-time workers. Second, the job market is loosening, but not by much. The Fed is preoccupied with the metric of job openings relative to the number of those looking for work.

 

Jeffrey Roach (01:00):

 

The Fed will not likely pronounce mission accomplished until a slowing economy pushes firms to cut some of those vast number of openings. As you see in the second chart, the trend is encouraging, and that's why markets are not convinced that the Fed will hike rates in the upcoming meeting. Going forward, investors need to watch early warning signs from any changes in business hiring intentions. Third, layoffs will probably tick up again if the economy cools, but so far, the majority of firms in recent years cut their workforce because of cost cutting reasons, not because of weaker economic growth. What that tells me is firms are in a good position to endure a downturn. This is important for investors to remember because we could enter a period of weak economic activity, yet we could potentially see markets not sell off as much as they normally do when an economy reaches a recession. Looking ahead, investors should watch weekly initial unemployment claims for early warning signs. If you want more insights on global market trends, follow us on social media and take care.

In this edition of the Econ Market Minute, Jeffrey Roach, Chief Economist for LPL Financial, shares three key takeaways for investors to know about the labor market. First, the ratio of part-timers in the job market tends to go up in recessions. Second, the job market is loosening, but not by much. Finally, layoffs will probably tick up again if the economy cools. Looking ahead, investors should watch weekly initial unemployment claims for early warning signs.

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