After a half-decade of steady gains, the U.S. labor market appears to be leveling off. What that plateau means for the economy’s trajectory is one of the biggest questions hanging over policy makers and investors.
Hiring is consistent but slower than in recent years, the unemployment rate is no longer falling and layoffs are holding at a historically low level. But participation in the workforce is stuck near a 40-year low.
If the moderate hiring rate continues, that should keep the unemployment rate in check by absorbing new entrants to the workforce. That’s a good thing, but it might not be enough to deliver significantly higher paychecks for workers or draw discouraged Americans back into the labor force.
Mixed signals from the labor data pose a challenge to companies forecasting future demand, Federal Reserve policy makers attempting to set interest rates and investors trying to assess the climate ahead.