There was a stretch, not all that long ago, when the American jobs machine felt almost unstoppable. Payroll figures consistently exceeded expectations. Employers were hiring, workers were moving, and the unemployment rate kept drifting lower in ways that surprised even seasoned economists. It felt, for a while, like a sprint that might never slow.
Now it’s slowing down. The most obvious indication to date that the labor market has shifted gears was provided by the June jobs report. Market observers described the shift plainly: after three consecutive months of remarkable payroll gains, the pace has settled into something closer to a jog. The figures aren’t particularly bad. Simply put, they are quieter. more thoughtful. The type of monthly numbers that used to make headlines but no longer do, which is a headline in and of itself.
The fact that this pattern appears so familiar in retrospect is both intriguing and a little unsettling. Usually, labor markets don’t crash overnight. They decelerate. Run, jog, or crawl. Observing the nearly textbook progression in real time begs the obvious question of where we truly fall on that spectrum.
January gave a preview of what deceleration can look like when it accelerates. According to tracking data, job cuts that month reached their highest level since the 2009 recession, with over 108,000 layoffs announced. Although it wasn’t simple to ignore, that one figure doesn’t by itself define a trend. It is possible that those cuts were absorbed by the economy without causing long-term harm. It’s also possible that the damage is still progressing.
In the meantime, fewer Americans are traveling than they have in many years. The primary culprits, according to economists, are high housing costs and high interest rates; people are stuck in low-rate mortgages from a few years ago and are unable or unwilling to trade them in for something more costly. But shifting work patterns are part of it too. For a long time, one of the most underappreciated advantages of the American economy has been geographic mobility. It’s important to consider what that means about the opportunity itself when people stop pursuing it.
It’s not insignificant that the unemployment rate is still low by historical standards. Jobs are often the last indicator to soften before a real downturn takes hold — a lagging signal rather than a leading one. This implies that even though the currents beneath the surface are shifting, the image may still appear to be relatively calm. There’s a sense, talking to people who follow this closely, that the number most worth watching right now isn’t the headline unemployment figure. It’s the pace at which employers are adding jobs, and that pace is clearly slipping.
There’s nothing to be alarmed about. A jog is not the same as a crawl. A slowdown is not the same as a recession. The labor market, even in its cooler current form, is still generating employment. However, the circumstances that led to the sprint—demand spikes brought on by the pandemic, hiring spurred by stimulus, and a workforce catching up after years of disruption—have largely passed. All that’s left is a market discovering its own speed, and it’s still genuinely unclear what that speed is.
It’s difficult to ignore how drastically the conversation has changed. A year ago, the main concerns were that wages were too high, the labor market was too tight, and the Fed would need to apply more pressure to lower prices. The concern is now directed in the opposite direction. The cooling that policymakers wanted has arrived — perhaps more thoroughly than anyone planned for.
Anyone can speculate as to where it will go from here. However, by most accounts, the sprint is over.
