Labor Market Slowdown: Gradual, Not Recessionary

The latest jobless claims data suggests a gradual slowdown in the labor market, rather than a sign of an impending recession. The four-week average of initial claims fell to 223,250 in the week ended Nov. 18, down from 231,000 in the previous week, according to the Labor Department. This indicates that the labor market remains relatively healthy, despite concerns about a potential economic downturn.



The slowdown in the labor market can be attributed to several factors, including a decrease in monthly job growth and an increase in the unemployment rate. The three-month average of employment growth fell from 243,000 jobs added per month in January to 173,000 in November, indicating a significant slowdown in job creation. Additionally, the unemployment rate rose from 3.7% in January to 4.2% in November, reflecting a higher level of joblessness in the economy.

However, it is essential to note that the labor market slowdown is not indicative of a recession. Federal Reserve officials had predicted a gradual increase in the unemployment rate in their Summary of Economic Projections (SEP) from December 2023, which aligns with the current data. The median projection for the unemployment rate across Q4 2025 is 4.3%, suggesting that the Fed believes the labor market will remain in a healthy long-run environment.

The gradual labor market slowdown has implications for consumer spending, which is a significant driver of Big Tech earnings. As the labor market cools, consumers may become more cautious with their spending, leading to a potential decrease in demand for goods and services, including those provided by Big Tech companies. This could negatively impact Big Tech earnings, as these companies rely heavily on consumer demand for their products and services.



In conclusion, the latest jobless claims data suggests a gradual slowdown in the labor market, rather than a sign of an impending recession. The slowdown can be attributed to a decrease in monthly job growth and an increase in the unemployment rate. However, the labor market remains relatively healthy, and the slowdown is not indicative of a recession. The gradual labor market slowdown has implications for consumer spending, which could negatively impact Big Tech earnings.