The Federal Reserve is increasingly focused on the labor market, which Chair Jerome Powell on Friday described as “curious” but fragile. While unemployment remains low and layoffs limited, hiring has slowed to levels not seen since before the Covid-19 pandemic, raising fears that even a modest rise in job cuts could trigger broader employment losses.
Revisions to the July jobs report showed weaker growth than expected, leading Powell to suggest the Fed may cut rates at its next meeting despite inflation staying above the 2% target. He warned that if labor risks materialize, they could do so quickly “in the form of sharply higher layoffs and rising unemployment.”
The hiring rate in June fell to 3.3%, below its February 2020 level, while layoffs held near a record low of 1%. Economists say businesses are “labor hoarding,” reluctant to cut staff after pandemic-era shortages, but the trend has slowed opportunities for younger and lower-income workers.
Some companies cite uncertainty from Trump’s tariffs as a factor in hesitating to hire. Economists caution that without stronger job creation, small increases in layoffs could push the U.S. economy toward contraction.
Sources
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