Robust employment and a strong jobs market are at the crux of a healthy, growing economy. Consumption makes up roughly two-thirds of GDP, and as we’ve seen these figures have exceeded expectations with U.S. Real GDP coming in last quarter at 5.2%, compared to 2.10% last quarter and 2.70% last year. This growth in GDP is also taking place in an inflationary environment, one which most financial prognosticators thought would take us into a recession in 2023. Didn’t happen. Why? One reason has been the strength of the jobs market and the ability of workers to not only feel secure in their positions, but comfortable as well to make employment changes for either career growth or more money. One has to wonder whether this momentum can continue in 2024.
Is it a surprise that these macroeconomic numbers remain high? Not really, after all it is an election year and the Bureau of Labor Statistics is a government agency ostensibly unbiased, but faith in our government statistics and institutions in general has become suspect to many. The November jobs report scheduled to be release Friday, November 8th should provide additional clues as to whether the historically tight labor market is set to loosen. This generally isn’t a touchy-feely concept, but this last quarter of 2023 feels different. The Labor Department says that job openings in fields that were once prevalent, like real estate and retail, are on the decline. You also don’t notice the seasonal panic employers have had over the last several holiday seasons trying to find help to make it to the end of the year. The jobs opening rate has trended down while the unemployment rate is ticking up. \
Let’s take a look first at the bullish scenario for employment in the upcoming year. According to business consulting firm Robert Half, 57% of companies surveyed plan to add new permanent hires in the first half of 2024, and 67% expect to hire contract workers as well. The reason for these increases is all the more important. Managers cite company growth as the primary factor in influencing the hiring decision. These same managers are stating that it is still difficult to fill the vacancies that they have, and cite the following three reasons, according to Robert Half:
- Finding candidates who align with the company culture (49%)
- Meeting candidates’ salary expectations (48%)
- Lack of candidates applying for open roles (42%)
Not to be Pollyannaish, but there are economic factors at work presently that also dictate a possible soft landing and positive employment growth. While inflation is still high at its core, it has come down. Oil is below $70 a barrel and gas in my area is $2.69 a gallon. I bet you could guess I’m not in California. The potential for the Federal Reserve to avoid further interest rate hikes and the optimistic outlook for the stock market and the economy for the remainder of 2023 into 2024 could have positive implications for job seekers, as noted in the Robert Half data.
If inflation remains at current levels or decreases, the Fed may be able to leave interest rates unchanged, which is viewed positively by the market. In addition, big investment banks like Goldman Sachs and Morgan Stanely are forecasting the U.S. economy to improve into 2024. In a recent letter to clients, Goldman states, “We forecast the S&P 500 index will end 2024 at 4700, representing a 12-month price gain of 5% and a total return of 6% including dividends.”
So what could go wrong? According to the Organization of Economic Co-Operation and Development (OECD), unemployment in the U.S. is expected to increase from a current rate of 3.6 percent to 4.1 percent in 2024. That’s fairly significant. Pandemic relief is behind us as data suggests more Americans are filing unemployment claims, which are at the highest point since the pandemic. This alludes to the fact that the Fed’s rate hikes are working, albeit people not working. As initial and continued jobless claims rise, workers find it increasingly challenging to secure new employment.
On the manufacturing front, factory orders and slowdowns have continued, as well as a continuing contraction of the real estate market. Higher borrowing costs for not only housing, although it is generally the largest expense for Americans, but higher interest rates associated with credit card debt have dampened both consumer and business spending.
In addition to a slowdown in spending, workers have quit quitting their jobs. Surely a sign that one is concerned with job security and fretting the fact that there are not as many options today as there were last year at this time. To make matters worse, raises are getting smaller. While pay gains are currently above historic levels, they are falling as prices are rising. It’s uncertain as to which argument on the employment situation will play out in 2024. Despite concerns about a potential recession, economic indicators such as GDP and employment have shown resilience, leading to a more optimistic outlook for the stock market and the economy.
