14 charts from unofficial data show a cooling labor market

Despite limited official data due to a government shutdown, private sector indicators reveal a significant and broad-based cooling of the U.S. labor market. Private sector job creation is declining, job openings have fallen to their lowest level since 2021, and both hiring and attrition rates are decreasing. Moreover, planned seasonal hiring is notably weak, and announced layoffs reached a Q4 high not seen since 2008, with some models estimating October unemployment near 4.4%. This widespread deterioration, alongside cooling wage growth and declining consumer confidence in job prospects, signals potential economic contraction that could ultimately pressure corporate earnings and equity markets.

Analysis

The U.S. labor market is exhibiting significant and broad-based deterioration, despite the ongoing government shutdown limiting official data. Private sector indicators reveal a sharp slowdown in job creation, with ADP reporting only 42,000 new jobs in October and Revelio Labs/LinkUp estimating nonfarm payroll *declines* of 9,100 and 5,000 respectively. This trend is further evidenced by Indeed's data showing job postings at their lowest level since 2021, with year-over-year declines across nearly all sectors.

Hiring activity is notably subdued, as Revelio Labs indicates a continued fall in hiring rates, while attrition rates are also declining, suggesting reduced worker mobility. Seasonal hiring plans for September and October are projected at 400,000, significantly below the 2014-2019 average of 625,000, according to UBS. Concurrently, announced job cuts surged to 153,074 in October, marking the highest Q4 total since 2008, and the Chicago Fed's model estimates October unemployment at 4.4%, a four-year high.

This widespread labor market weakness is translating into cooling wage growth, with both Indeed and ADP Pay Insights reporting a plateau. Consumer confidence surveys from the Conference Board and NY Fed reflect growing pessimism regarding job availability and future employment prospects. The cumulative effect of these trends points to potential economic contraction, which would inevitably pressure corporate revenue growth and, consequently, corporate earnings, a primary driver of stock prices.

Key Decisions for Investors

• Investors should closely monitor private sector labor market indicators for continued deterioration, as official data remains limited.
• Re-evaluate corporate earnings forecasts, particularly for cyclical and consumer-discretionary sectors, given the projected slowdown in economic growth and cooling wage environment.
• Consider defensive portfolio positioning or hedging strategies to mitigate risks associated with potential economic contraction and its impact on equity valuations.