As foreshadowed by the decline in the Augusta Leading Economic Index last week, employment in the Augusta Metropolitan Statistical Area fell in July. Just not by much.
No industry saw large job gains in July. Education and health services and professional and business services both saw employment increase by about 100. Retail lost 250 jobs, and government shed 300 jobs, spread over local and state employment. Other services lost 140 jobs. All other industries had job gains or losses of fewer than 60 jobs. This month is a good illustration of the “low hire – low fire” labor market we are in now.
The national hiring rate, hires as a percentage of employment, is currently at 3.4%, a rate not seen since the recovery from the great recession.
The national total separations rate is also currently 3.4%. Separations include quits, layoffs or discharges as well as retirements. Again, this rate has rarely been below this level in the last decade.
Why the reluctance to hire and fire? There are several uncertainties firms and workers are grappling with. First is AI. There has been a lot of capital investment in AI, but less human capital investment as firms try to determine how AI will change their business practices and worker needs and skills. Second, there is also uncertainty over the macroeconomy. The Federal Reserve is facing conflicting data regarding its dual mandate of maximum employment and stable prices. Inflation has remained stubbornly above its 2% target for five years, yet employment data has been weak also. Seven of the last 17 months have seen declines in employment, but each of these months has been followed by increases. There seems to be no real pattern.
Third, the macroeconomic uncertainty raises uncertainty over the future path of interest rates. Fourth, on the fiscal front, government debt hit $40 trillion recently, which also pushed up borrowing costs. Finally, don’t even mention uncertainty over tariffs or control of Congress in the November elections!
We may remain in a holding pattern for a while.
