Consumer Says: Hidden Soft Spots in the U.S. Labor Market

What's new in the economy?

• Spending continues to surprise to the upside: Retail spending numbers for September were released last week, showing a stronger-than-expected 0.4% bump from the previous month. Compared with September 2023, that number looks a bit weaker with a 1.7% nominal increase, meaning retail sales growth hasn’t kept up with the pace of overall inflation.  
• The Federal Reserve will announce its next rate move on Nov. 7th: Following the closely watched decision to cut rates by 50 basis points in September, Fed news has been a bit quieter in the interim–but that’s about to change as we get closer to their next meeting and expected rate cut. With most data coming in warmer than expected so far, many are thinking a more modest cut looks likely–though there are a couple of key data releases between now and then that may influence the Fed’s decision-making. The Personal Consumption Expenditures and its associated price index (the Fed’s preferred inflation measure) publishes Thursday 10/31, and the Bureau of Labor Statistics’ October jobs report will come out Friday 11/1. 
• With the U.S. presidential election looming closer and closer, the economy remains a central issue at stake in terms of both the outcome of the contest and future policies for the new administration. Our Economy & Elections report spotlights how U.S. adults are perceiving each candidate’s economic agenda, offering a detailed look at what issues matter most as voters prepare to vote. 

Consumer says...

• Unemployment is rising but layoffs are still low: Since interest rates began rising in 2022, the labor market has softened–but joblessness hasn’t risen as much as many might have expected. Unemployment has clearly trended higher over the past year, however layoffs have increased only modestly, with Morning Consult’s weekly lost pay and income tracker showing a relatively flat trend even as elevated interest rates put pressure on businesses.

• It’s getting harder to find a job. One factor that has allowed unemployment to drift higher despite modest layoffs or job separations is the trend toward longer job searches. Slower hiring and fewer job postings are drying up job opportunities, with Morning Consult’s recent survey finding that over half of unemployed workers believe finding a job is more difficult than it was a year ago. As new workers enter the labor force, or the modest number of laid off workers look for new employment, those accumulating jobseekers spend longer amounts of time unemployed–driving up unemployment even if the rate of newly unemployed workers remains modest.

• Wage bargaining is down, potentially undermining spending. In addition to more challenging job searches amid slower hiring, weakening labor demand showed up in Morning Consult’s survey of workers in a multitude of forms. Employed adults have been increasingly likely to say their workplace has more than enough workers rather than too few, and a growing number of workers report a desire to work more hours than they are currently getting paid for. Critically, the net share of adults who believe their employer would give them a raise if they asked for one has been trending sharply lower since 2023, suggesting the cooling labor market is undermining employees’ wage bargaining power. At a time when elevated living costs remain top of mind for U.S. households, limited upside from wages could weigh on consumer finances, with many survey respondents reporting they would typically use a raise for priorities like saving, paying off debt, or investing for the future.

• Gender inequality in the workplace widens when men and women become parents: This week’s podcast offers a sneak peek at some of the insights publishing in a follow-up report spotlighting how gender and parental status impact labor force outcomes. Consistent with government data and countless other research findings, Morning Consult’s survey finds a persistent gap between male and female workers’ employment status and earnings, as well as differences in their perceived treatment at work. The gap is much wider, however, between male and female workers who are also parents: Dads are seemingly thriving in the workforce across a slew of metrics, while working mothers report very little advantage over women overall (and a disadvantage relative to men overall) in aspects like pay growth.

Further reading:

• Much of the data underlying the labor report featured in this week’s episode comes from our daily, weekly and quarterly tracking of various metrics available on the U.S. Jobs & Labor tracker. Take a look for metrics like Morning Consult’s own U.S. unemployment index, and more! 
• Another recent report from Morning Consult’s industry analysis team digs into a very specific segment of the labor market–digital side hustlers! Read the full report here. 

Stay tuned! We'll be back discussing the latest econ news along with our own research and insights on another episode in two weeks–just ahead of the Fed’s next rate announcement!