Last week, the initial jobless claims data moved back below the 200K level to 187K. That was the lowest level since September 2022 when the number came in at 184K.

That number last week corresponded with the survey week for the BLS for the next US jobs report to be released on February 2nd. Will there be a strong number when that report is released?

In an interesting article in the Wall Street Journal today, there is a report arguing for the opposite dynamics. They report that more workers want to change jobs, but the job market is more challenging.

Some of the details include:

  • Restlessness Among Workers: Despite a cooling job market, they cite a LinkedIn survey reveling a significant increase in professionals (85% of 1,000 polled) considering a job change compared to the previous year (67%).

  • Decreased Leverage for Job Seekers: Job seekers are finding less favorable conditions, with companies offering smaller pay raises and less flexibility. Negotiations for perks like additional vacation time are also tougher.

  • White-Collar Job Market Slump: The availability of white-collar jobs in fields like finance, marketing, and software development has declined, with job listings falling below pre-pandemic levels. This contrasts with the robust market for hourly jobs.

  • Increased Job Dissatisfaction: Many workers feel trapped due to reduced opportunities, inflation outpacing pay raises, and increased work demands.

  • Shift in Hiring Power: The balance of power has shifted towards hiring managers, with candidates having less negotiating strength.

  • Decline in Pay Premium for Job Switching: Data from the Federal Reserve Bank of Atlanta shows a decrease in the pay raise advantage for those switching jobs.

Advantage: Employer.

Despite the negative tone, there is optimism for future hiring. Some economists anticipate an improvement in hiring environment for white-collar rose if interest rates fall.

The Fed is now in a quiet period ahead of its interest rate decision on January 31. The Fed is not expected to change rates at that meeting nor the March meeting. However, the Fed Fund futures for May are pricing in a Fed funds rate of around 5% from 5.33% in January and 5.29% in March. The January 2025 futures are implying a rate of around 4%.

The tilt one way or the other, will be influenced by employment and of course inflation. If the employment trends follow along with what the initial jobless claims data is suggesting, that will delay hikes. The risk of inflation heating up is still a concern by Fed officials especially with the stocks higher, yields lower potentially improving consumer spending and pushing up inflation.

Conversely, if the tighter employment trends as outlined in the article persist, maybe the pricing of cuts will be supported by the fundamentals.

Of course, the Fed is still hoping for something in between with a soft landing that is not too hot, nor too cold. .