David Rosenberg, founder of Rosenberg Research and a top economist, suggests that the U.S. job market is at a critical turning point, potentially leading the Federal Reserve to cut interest rates faster than anticipated.
In a recent report, Rosenberg highlighted the ratio of job openings to unemployment rates, cautioning about the job market. According to the Bureau of Labor Statistics, this ratio has significantly declined in recent months due to a slight rise in unemployment combined with fewer job openings.
Government data shows that U.S. job openings fell to 7.6 million in July, down from a peak of 12.1 million in 2022. Meanwhile, the unemployment rate was 4.2% in August.
Rosenberg predicts that the unemployment rate will rise faster than the decrease in job openings, marking a crucial point for the job market. This scenario may underscore the need for faster rate cuts by the Federal Reserve.
Rosenberg noted, "We believe the rising unemployment rate is overtaking the decline in job openings, accelerating the urgency for future rate cuts by the Fed. The drivers behind recent normalizations have reversed. The unemployment rate has risen by 0.5% this year, while the job openings rate has stabilized."
For months, Rosenberg has indicated weaknesses in the labor market. He previously predicted that the unemployment rate could exceed 5% by year-end, as employers who stockpiled labor during the pandemic may start laying off workers, leading to net unemployment in the U.S.
Companies are beginning to signal hiring slowdowns or accelerated layoff plans. According to a report by Challenger, Gray & Christmas, job cut announcements in August surged by 193% month-over-month. Meanwhile, hiring plans from the start of the year through August have dropped to their lowest level since 2005.
Federal Reserve officials are also cautious about the employment situation. In a recent press conference, Fed Chair Jerome Powell mentioned that the job market might be nearing a point where further reductions in job openings will more directly translate into unemployment.
Rosenberg stated, "We believe recent actions indicate a real turning point for the job market. As the labor market slows, we expect job openings to show more moderate changes, while the unemployment rate shows larger changes. It's not just us who think this way. Powell gave a similar response during last week's press conference when asked about this issue."
However, most experts agree that the job market currently remains on solid footing. According to the latest employment report, the August unemployment rate was 4.2%, still near historic lows. At the same time, economic growth remains resilient, with the Atlanta Fed's latest estimate projecting a 3.1% GDP growth for the U.S. in the third quarter.
