Breaking down the labor market: What it means for employees and employers

For the most part, the state of the labor market is a guessing game for both organizations and their workforces. But once broken down, it could reveal just how they can prepare themselves for the upcoming months. 

As of June, the labor market showed significant signs of slowing down, according to Indeed's most recent job report. The data revealed that the unemployment rate rose to 4.1% — the highest it's been since November 2021 — as well as slowing job gains and moderate wage growth. But what does that mean for employees and employers? 

"This report shows the temperature of the labor market is still pleasant, but if current trends continue, the weather could get uncomfortably cold," says Nick Bunker's, economic research director for North America at Indeed's Hiring Lab. "This means that for now, the labor market remains robust — but the future is uncertain." 

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The unemployment level itself isn't the biggest issue. In the midst of the pandemic, unemployment rates peaked at 12.3%, roughly triple what it is now, before eventually dropping to historic lows. It's the speed at which it has risen since the beginning of the year that's cause for concern, according to Bunker, because when combined with the fact that the share of workers with a job has stalled at around 80% could be a sign that job gains have lost momentum and job losses could be imminent.

Realistically, this means applicants and job seekers should be aware that they might have a tougher time finding a job now compared with a few years ago, Bunker says. 

Still, current employees shouldn't panic just yet. 

"Job security is good these days," he says. "Hiring may have slowed down, but employees will be happy to know that layoff rates are still low by historical standards — even as the unemployment rate drifts upwards." 

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As for employers, the data speaks mostly to their ability to recruit. The diffusion index, a measure of job gains, was well above 50 in June, which means that the rate at which industries are adding jobs and the rate at which employees are gaining jobs is more or less equal. According to Bunker, this means employers who are still looking to hire may face less competition, which may be good news for those who struggled to fill roles during the Great Resignation. 

Overall, employees and employers alike should be treading carefully as they navigate the next few months. It's hard to predict what's on the horizon, but acting proactively could make a significant difference when it comes to keeping their heads above water should the labor market enter another round of volatility. 

"The trend is clear: the labor market is cooling off," Bunker says. "The question is whether the recent run of data is simply a continuation of the relatively painless moderation of the past few years or the beginning of something more damaging."