Patrice & Associates July Labor Market Report
In July, U.S. hiring slowed significantly, with only 114,000 jobs added and the unemployment rate rising to 4.3%. This marks the third consecutive month of increasing unemployment. While this rise could potentially trigger the Sahm Rule, an early recession indicator, many economists believe the situation is different this time. The unemployment rate remains relatively low, and the increases have been modest. The Sahm Rule suggests a recession when the three-month average unemployment rate is half a percentage point or more above the lowest three-month average in the past year. Although historically accurate, the current labor market is affected by unique factors such as post-COVID shifts in labor supply and increased immigration.
The healthcare sector saw the largest payroll gains in July, with 55,000 new jobs, particularly in home health care, hospitals, and nursing and residential care facilities. Construction employment also rose modestly, adding 25,000 jobs, mainly among specialty trade contractors. Employment in transportation and warehousing increased by 14,000 jobs, and social assistance grew by 9,000. Other industries, including mining, oil and gas extraction, manufacturing, wholesale and retail trade, financial activities, professional and business services, and leisure and hospitality, showed little change in employment. Government employment also remained steady.
The labor force participation rate remained largely unchanged at 62.7% in July and showed little variation over the past year. The leisure and hospitality industry continues to hire, though not at the same pace as in the immediate post-pandemic period. At P&A, our job searches for mid- to upper-level management positions in hotels are still robust, and there is strong demand for executives with specialized experience in the restaurant industry. However, there is some pricing pressure in traditional mid-management roles, with clients seeking highly qualified candidates at more reasonable rates than previously offered by recruiters.
While the labor market is weakening, it still presents opportunities for companies in need of qualified workers. With the unemployment rate below 5%, companies continue to struggle to find top talent, making staffing firms invaluable in the vetting process. Given the softening labor market, the Federal Reserve may accelerate rate cuts to stimulate the economy and prevent a recession.
In Canada, our offices report sustained demand for skilled staff. Statistics Canada reported on Friday that the unemployment rate increased to 6.4% in June, up from 6.2% in May, due to a growing labor force. This is the highest unemployment rate since January 2022, when it reached 6.5%. The Bank of Canada, leading the Group of Seven countries in easing monetary policy, cut rates for the second consecutive time in July as inflation showed signs of cooling. It appears the U.S. Federal Reserve may soon follow suit.
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