America has two labor markets now
Why it matters: Welcome to the low-hire, low-fire labor market. Private-sector layoffs are at historic lows, but that masks a dreadful outlook for unemployed workers or those unhappy with their current positions.
Driving the news: The labor market surprised in June with a better-than-expected payroll gain of 147,000, the government said on Thursday.
But a whopping 85% of those job gains came in just two sectors, according to calculations by Mike Konczal, a former Biden economic official: education and health care.
Hiring in other sectors — including professional and business services, a catch-all category for white collar jobs — was little changed, the government said.
The big picture: That continues the "frozen job market" trend that has plagued the economy in recent years. The trend is being exacerbated by the rise of AI, as employers experiment with how to make their workforces more productive.
Separate data released this week showed the number of layoffs fell by 188,000 in May, hovering above multi-decade lows.
But the number of people hired into new jobs also fell by 112,000, to a rate significantly below its pre-pandemic levels.
The number of workers continuing to collect unemployment benefits is at the highest level since 2021, a sign that it is taking jobless workers longer to find a job.
What they're saying: "We're in a complex jobs market —it's not falling apart but the lack of dynamism, the lack of churn and the lack of hiring has been punctuated in the first half of the year," says ADP chief economist Nela Richardson.
"Many employers are loath to lay off workers until they see the whites of the eyes of a recession, having had such problems finding suitable workers in the first place," David Kelly, chief global strategist at J.P. Morgan Asset Management, wrote in a recent note.
The bottom line: If you look only at how many Americans are losing their jobs, this appears to be a pretty terrific labor market. If you look only at how many are being hired for new jobs, it is the weakest in years.
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