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The job market has impressed recently, but there are worrying signals beneath the surface.
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Wall Street forecasters have pointed to four signs of weakness flashing in the US labor market.
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That weakness heightens recession odds, especially if unemployment begins to rise meaningfully.
Today's job market looks to be on solid footing, but there are subtle signs that hiring is starting to weaken, upping the odds that a recession strikes.
The economy added a blowout 303,000 jobs last month, and the unemployment rate remained near historic lows at 3.9%.
But it's unclear how long that strength will hold up, especially as financial conditions in the economy look poised to remain tighter for longer while inflation is sticky. The job market is already flashing key signs of weakness, and a hiring slowdown could be around the corner, Wall Street strategists have warned.
Here are four signs the stellar US job market may be about to stumble:
1. Unemployment trends are mirroring past recessions
The unemployment rate remains near historic lows, but the number of jobless Americans has been rising steadily higher over the past year — and is now close to triggering a classic recession indicator. The three-month moving average of the unemployment rate has risen 30 basis points above its 12-month low. That's 20 basis points away from triggering the Sahm rule, a highly accurate indicator that the economy is in the early stages of a recession.
It's also dangerously similar to what occurred prior to the last four recessions, according to top economist David Rosenberg.
"Even the famed Sahm Rule on unemployment trends is right where it was in March 2020, November 2008, March 2001, and September 1990! Delayed is not derailed," Rosenberg said in a client note on Monday, referring to the odds of a recession.
2. Layoff announcements are rising
Firings could pick up in the coming months, as more firms look poised to reduce headcount.
The total layoff rate remained near historic lows in February, clocking in at 0.9%. But job-cut announcements rose to 257,254 over the first quarter, according to the career transitioning firm Challenger, Gray & Christmas. That's 120% higher than what companies announced the previous quarter, the firm said in a recent report.
Cost-cutting was the main reason firms were looking to let go of their workers, accounting for 26% of planned layoffs in the first quarter. 18% of layoffs were attributed to business restructuring, and 9% were attributed to "market conditions," the report found.