US employers ‘more selective’ due to uncertain outlook: Fed

NEW YORK, NEW YORK – JUNE 07: A “Now Hiring” sign is seen at a FedEx location on Broadway on June 07, 2024 in New York City. (Photo by Michael M. Santiago/Getty Images/AFP

Washington, United States — US employers are becoming more selective about who they hire amid ongoing concerns about the “uncertain” economic picture, the Federal Reserve said in a new report published Wednesday.

“Employers were more selective with their hires and less likely to expand their workforces, citing concerns about demand and an uncertain economic outlook,” the Fed said in its “beige book” survey of economic conditions.

“Accordingly, candidates faced increasing difficulties and longer times to secure a job,” the report added.

READ: Oil prices, dollar fall as market awaits US jobs data

The survey data underscore the growing weakness in the US labor market ahead of an interest rate decision later this month at which Fed policymakers are widely expected to start cutting rates from their current two-decade highs.

The Fed, which has a dual mandate from Congress to tackle both inflation and the labor market, has said recently that its twin goals are now coming into better balance, as inflation slows and the unemployment rate ticks higher.

“As the labor market has cooled in recent months, the balance of risks has shifted,” Atlanta Fed President Raphael Bostic wrote in a paper published earlier Wednesday.

“I am today giving basically equal attention to the maximum employment objective,” added Bostic, who is a voting member on the Fed’s rate-setting committee this year.

In the beige book, the Fed said economic activity had grown “slightly ” in three of its 12 districts, while noting a growing number of districts reporting “flat or declining activity.”

While overall employment levels remained steady, “there were isolated reports that firms filled only necessary positions, reduced hours and shifts, or lowered overall employment levels through attrition.”

At the same time, wage growth remained “modest” on balance, and consumer spending fell slightly in most districts.

On the inflation side of its mandate, the Fed said prices had increased “modestly,” although some districts saw cost pressures moderating for food, lumber and concrete.

The slight downturn in the labor market and moderating price pressures will likely fuel calls for the Fed to announce it is cutting interest rates on September 18.

Futures traders see a smaller, quarter percentage-point cut as the most likely scenario, while not ruling out a larger half-point cut, according to data from CME Group.