The "once-in-a-century" job market in the United States has come to an end

The US labor market is cooling down significantly.

The Wall Street Journal commented in an article on July 24th that the "once-in-a-century" job market in the US has come to an end. The recruitment boom in the US triggered by the pandemic in recent years is fading, and the prospects for American workers are becoming more subdued.

In June, the number of new non-farm jobs in the US dropped significantly, with the unemployment rate rising to 4.1%, reaching the highest level in two and a half years. American workers no longer have the ease of "leaving whenever they want" in the workplace, and college graduates are also finding it difficult to find employment.

The number of job vacancies per unemployed person in the US has returned to pre-pandemic levels at 1.2, which is lower than the 2 or more in 2022. The number of job openings in US companies has also dropped to pre-pandemic levels. Many economists believe that the US job market has rebalanced from the overheated state during the pandemic, but some are concerned that the situation may continue to deteriorate.

Claudia Sahm, Chief Economist at investment firm New Century Advisors, expressed uncertainty about whether the current cooling of the US job market has ended. Nick Bunker, an economist at job search website Indeed, also questioned the sustainability of the labor market, stating that the labor market was exceptionally hot under the huge impact of the COVID-19 pandemic, but this trend will not last forever.

The "water content" of US non-farm employment is very high, with the employment rate falling instead of rising

Although the US added 206,000 non-farm jobs in June, maintaining job growth for several months, many have raised doubts. If the US labor market has been so strong in employment over the past year, why has the unemployment rate not decreased but instead increased?

Perhaps the US labor market is far from as strong as it appears today. Nomura stated that the current monthly growth of 200,000 non-farm jobs in the US is only equivalent to 100,000 before the pandemic.

An article by Wall Street News pointed out that the current non-farm employment has a high "water content", with a large number of illegal immigrants entering the US border, accounting for more than half of the non-farm employment. Data shows that out of nearly 220,000 new non-farm jobs each month, about 128,000 come from immigrants, accounting for over half. If these immigrant workers, especially illegal immigrants, are excluded, the US labor market would not be as strong.

Nomura believes that with a large influx of illegal immigrants, the "balanced" growth rate of non-farm employment has doubled from 100,000 per month before the pandemic to 200,000, halving the impact of non-farm employment on the unemployment rate.

Last month, US companies focused their recruitment efforts on a few industries, including healthcare, construction, and government work. Other professions, such as restaurant work and certain white-collar jobs, have stabilized or declined after the frenzied growth during the pandemic.

As companies reduce hiring, competition among job seekers intensifies once vacancies arise

Recruitment in several industries in the US is currently declining or stagnant, making the job market extremely competitive. The current severe recruitment situation in the US marks the end of the peak labor shortage period, and in some industries, the situation seems to have reversed An American job seeker in the human resources field, Carren Jones, stated, "Once there is a job vacancy on LinkedIn, more than 100 people apply within an hour."

American job seekers are also facing the awkward situation of declining wages. For example, in the cybersecurity industry, some positions on LinkedIn now offer salaries ranging from $175,000 to $225,000, which is almost the same level as the $275,000 salary level from previous years.

In comparison to the past, during the period of employment prosperity, employers kept raising wages to attract talent. According to US federal data, with a shortage of labor, the year-on-year wage growth rate reached 5.9% in March 2022. US labor unions also seized this opportunity to significantly increase workers' wages and benefits through negotiations, including UPS drivers, auto workers, healthcare workers, etc. However, wage growth has since fallen back to normal levels, with a 3.9% year-on-year increase in wages last month.

Furthermore, there are signs of a cooling labor market in many regions of the United States. The Federal Reserve Bank of Minneapolis reported an increase in visits to job fairs and employment centers. Many businesses in the Kansas City Federal Reserve Bank's jurisdiction have reduced employee work hours and cut back on recruitment information. Many American companies typically lay off employees because they hired too many during the pandemic