Part 5/12:
Recent employment data depict a labor market in a peculiar state. Payroll growth has decelerated sharply—from an average of 168,000 jobs per month in 2024 to roughly 35,000 over the last three months. These figures, revised downward from initial estimates, suggest a slowing economy; however, the unemployment rate remains low at 4.2% and has been relatively stable over the past year.
Other indicators of labor market health—such as quits, layoffs, vacancy ratios, and wage growth—have shown little change or modest softening. Importantly, labor supply has softened alongside demand, leading to a significant reduction in the rate of job creation necessary to keep unemployment steady. With a slowdown in immigration and participation rates, the labor force growth has notably weakened.