U.S. labor market seen cooling in 2024, Fed surveys show

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U.S. employers expect to hire less in 2024, according to several regional Federal Reserve bank surveys, a trend that’s set to limit wage gains and cool inflation pressures.

The results precede the government’s monthly jobs report next week, forecast to show a 170,000 gain in December payrolls. Meanwhile, economists expect an average 80,000 monthly increase in the first three months of next year, about half this quarter’s pace.

The regional Fed data show that the central bank’s efforts to slow growth and temper inflation are filtering through into the economy. The results, while marking a slowdown, don’t indicate an outright contraction in payrolls.

In the Philadelphia Fed district, which includes Delaware, most of Pennsylvania, and southern New Jersey, a gauge of manufacturers’ employment expectations stands at one of the weakest levels since 2009.

The share of service providers in the Empire State expecting higher employment is the second-smallest in three years, according to the New York Fed. For manufacturers, it’s the lowest since March 2017.

Two Dallas Fed surveys showed about 30% of Texas manufacturers and service providers indicate they’re at “ideal” staffing levels, up about 7 percentage points from the start of the year. And about 15% of respondents say they’re overstaffed but aren’t laying off workers, twice the share from January.

The share of manufacturers in the Lone Star State expecting to boost employment fell to the lowest level since March 2020. For service providers, it’s hovering near the smallest in more than three years.

The Richmond Fed’s gauge of expected factory employment slumped in December to match the weakest reading since May 2020, while the same measure for services improved.

While businesses say that a lack of experienced and skilled workers remains a trouble spot, the survey results indicate that labor supply is coming into better balance with demand.

Annual wage increases of 7% in 2021 and even more in 2022 are seen slowing to 4.3% next year, according to the Dallas Fed. In the Kansas City Fed’s district, a gauge of wage expectations dropped to a three-year low.

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One thought on “U.S. labor market seen cooling in 2024, Fed surveys show

  1. So the labor market is cooling while we have an open border
    with record numbers of migrants coming in.
    Unbelievable!

    What are we going to do with the huge glut of unskilled labor. Just put them
    on the government dole???

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