A widely watched labor market sentiment indicator has dropped to its lowest level since early 2017, excluding the pandemic spike, signaling potential trouble ahead for the U.S. job market.
What Happened: On Wednesday, The Kobeissi Letter shared the results of the recent Conference Board's Consumer Confidence survey, showing that the gap between the percentage of Americans who say jobs are “plentiful” and those who say they are “hard to get” has shrunk to just 11.1%.
Seen by many economists as a forward-looking signal for labor market strength or weakness, historically, the narrowing of this spread has almost always been followed by a rise in unemployment. The spread is now at its lowest level since 2017, ignoring the spike seen during the COVID-19 pandemic.
According to the post, “It now suggests the unemployment rate could rise to 6.0% in the coming months.”
For context, the current U.S. unemployment numbers stand at 4.2%, according to the latest data from the Bureau of Labor Statistics. As such, these figures show that the labor market is deteriorating faster than the headlines numbers might indicate.
“The labor market is clearly losing momentum,” the post says in conclusion.
Why It Matters: While the U.S. unemployment report came in steady at 4.2% in May, there are growing concerns that AI is gutting entry-level jobs, hitting recent Gen Z college graduates the hardest.
On Wednesday, economist Craig Shapiro warned that AI will disrupt 25% of all jobs by 2030, and there is little to nothing that the Federal Reserve can do to address this issue.
“AI-driven labor displacement, accelerating in 2025, poses a structural crisis that Federal Reserve rate cuts cannot fix,” he said.
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