By comparison, the economy added an average of 488,000 jobs a month in the first five months of 2022.

Before the pandemic, a 250,000 increase in new jobs would have been seen as quite strong. And it would still show a healthy gain in hiring even now.

Yet evidence is growing that some companies are scaling back hiring plans, especially in the tech industry. Even companies that still want to hire, meanwhile, area struggling to find workers.

A pair of surveys of U.S. businesses by the Institute for Supply Management found that employment contracted in June. Most executives said the problem was finding enough people to hire, however, instead of a big drop in demand for their goods and services.

Whatever the case, the rapid hiring of the last two years is likely to continue to fade.

Hours on the job

The tightest labor market in decades and shortage of workers could prompt businesses to take a different tack if the economy slows to a crawl.

They could cut back on how many hours employees work instead of resorting to broad layoffs. Hiring them back later on once the economy firms up again might not be so easy.

The average number of hours people work each week has been flat at 34.6 for three months in a row. It’s slid from a recent high of 34.8 hours at the end of 2021 and a pandemic peak of 35 hours a year and a half ago.

” Firms are going to be hesitant to release workers but, if there is a slowing in labor demand, it will show in the number of hours worked,” said Drew Matus, chief market strategist at MetLife Investment Management.

Unemployment rate

Wall Street
DJIA,
+1.12%
expects the U.S. unemployment rate to hold steady at 3.6%, just a tick above the pre-pandemic low. The last time the jobless rate was that low was in the late 1960s.

But how long before it starts to move back up ?

The Federal Reserve predicts unemployment will rise over the next year or two as the central bank jacks up interest rates to try to curb high inflation. Higher rates typically slow the economy.

“Remember that the unemployment rate is a lagging indicator,” said Dan North, senior economist at trade credit insurer Allianz Trade North America. “It tells us what happened in the past so it’s no surprise it is low now. It’s going to start going back up.”

Size of labor force

How hard is it for businesses to find workers? The U.S. population has grown by 4 million since February 2020, the last month before the pandemic, but the labor force is still about a quarter-million smaller than it was back then.

The share of the working-age population in the labor force stood at 62.3% in May, leaving it more than a full point below the pre-Covid high. That’s the equivalent of about 1.5 million missing workers.

Worker pay

The surge in pay spawned by the labor shortage appears to be slowing. The increase in hourly wages is forecast to taper to 5% in June from 5.2% in the prior month and a 40-year high of 5.6% in March.

Economists forecast a 0.3% increase in hourly wages in June.

The big increase in pay has not been enough to keep up with inflation, however. The cost of living has jumped 8.6% in the past year.