For people who find themselves without jobs, getting back into the labor market is becoming increasingly difficult. The number of people who have been unemployed for 27 weeks or longer rose to 1.93 million, or a quarter of everyone who is out of work. And unemployment has been rising fastest among people ages 16 to 24, who tend to have less experience.
All of that is taking a toll on the moods of both businesses and workers, even those who are lucky enough to remain employed. In the monthly survey by the National Federation of Independent Business, executives say they are having an easier time filling open roles and are less likely to raise pay. The difference in the share of consumers in Conference Board surveys who say jobs are “plentiful” versus “hard to get” is at its lowest level since early 2021.
“They’re more reluctant to say to the boss, ‘Hey, I see you’re struggling to get hires; if you want me to stay, you’ve got to pay me more,’” said Christopher Williamson, the chief business economist at S&P Global Market Intelligence. “They’re more worried that the boss is going to turn around and say, ‘Sorry, we’ve got to let you go.’ So that wage bargaining power just isn’t there at the moment.”
Average hourly earnings rose 3.7 percent from a year earlier — still a healthy increase, but the slowest pace since July 2024. With prices rising more quickly, there’s a danger that wages will fall behind inflation, leading consumers to close their wallets in a way that causes businesses to let go of workers. And the share of the population that is employed has sagged since reaching a post-Covid peak two years ago, which means fewer wage earners are supporting everybody else.
Nonetheless, most forecasters do not expect a full-blown recession. Matt Bush, managing director of macroeconomic research at Guggenheim Partners, notes that the tax cuts in the Republicans’ domestic policy bill will also support some investment in the coming year, even as deficits mount.
“I think we’re past the worst of the initial policy uncertainty shock. Businesses are learning to adapt and how to navigate in this environment, so that should provide some support,” Mr. Bush said. “We don’t see a big acceleration from here, but we don’t expect a dramatic deceleration, either.”
