Loosening Labor

Both supply and demand of workers will prevent a surge in unemployment rates.

Not long ago, a group of my friends were discussing the worst aspects of taking a trip by airplane. While some bemoaned slow security and stiff seats, one friend offered that the start of the descent was most uncomfortable. For him, the shift to a downward path triggers the risk of air sickness.

I recognized that feeling—not just through my sweaty-palmed recollections of rough descents, but in my reaction to the October U.S. employment report. After more than a year of flying high, the labor market has changed trajectory and created some discomfort.

The October Employment Situation Summary revealed a gain of 150,000 jobs. On its own, that would be a fine figure, but it was offset by a downward revision of 101,000 payrolls to the strong readings in the prior two months. A fall in employment in the household survey pushed up the unemployment rate to 3.9%.

Details within the report revealed further causes for worry. The share of workers holding multiple jobs reached a cycle high of 5.2%, suggesting that more people are taking on second jobs to make ends meet. The number of workers employed part-time for economic reasons (not by their own preference for part-time work) reached an 18-month high. Average weekly hours worked in the service sector stepped down to a post-pandemic low of 33.2, suggesting slack capacity and unproductive labor hoarding. And keen-eyed observers noticed that total employment may have declined if not for an upward seasonal adjustment to estimated business births.

Once a job is lost, it is harder now than last year for job seekers to find their next role. The share of workers unemployed for 15 weeks or longer has gradually climbed to 36.5%, a five percentage point rise since March.