Economist: The US job market is approaching a turning point, and the pace of Fed rate cuts will "accelerate"

According to the Zhitong Finance and Economics APP, David Rosenberg, founder of Rosenberg Research and a top economist, stated that the U.S. job market is facing a key turning point, which may mean that the Federal Reserve will cut interest rates faster than expected.

In a report this week, Rosenberg mentioned the ratio of job vacancies to unemployment rate in the United States and issued another warning to the job market. According to data from the Bureau of Labor Statistics, this indicator has dropped significantly in recent months due to a slight increase in the unemployment rate combined with a decrease in job vacancies.

Government data shows that job vacancies in the U.S. dropped to 7.6 million in July, below the peak of 12.1 million in 2022. Meanwhile, the unemployment rate in August was 4.2%.

However, Rosenberg predicts that the rate of increase in the unemployment rate will outpace the rate of decrease in job vacancies, marking a key turning point in the job market and highlighting the need for faster interest rate cuts from now on.

Rosenberg wrote: "We believe that the rise in the unemployment rate is replacing the decrease in job vacancies, which will accelerate the pace and urgency of future interest rate cuts by the Federal Reserve. The drivers behind the recent normalization of the V/U shape have reversed, which is a key insight. The unemployment rate is rising, up by 0.5% just this year, while the vacancy rate has stabilized."

For months, Rosenberg has been pointing out the weakness in the labor market, previously predicting that by the end of this year, the unemployment rate could rise to over 5%, attributing this to employers who hoarded labor during the pandemic eventually starting to lay off workers, leading to a net loss of jobs in the U.S.

Companies have begun signaling the start of hiring freezes or accelerated layoff plans. According to a report from outplacement firm Challenger, Gray & Christmas, announced layoffs in August increased by 193% month-on-month. Meanwhile, recruitment plans from the beginning of the year to August have fallen to the lowest level since 2005.

Federal Reserve officials are also cautious about the employment situation. Fed Chairman Powell said at a recent press conference that the job market may be approaching a point where "further reductions in job vacancies will more directly translate into unemployment."

Rosenberg stated, "We believe recent actions represent a true turning point for the job market. As the labor market slows down, we will see more moderate changes in the vacancy rate and larger changes in the unemployment rate. It's not just us who think so. Powell gave a similar answer to this question at a press conference last week."

However, most experts believe that the job market still has a solid foundation. According to the latest employment report, the unemployment rate in August was 4.2%, still close to historic lows. Meanwhile, economic growth remains resilient, with the latest estimate from the Atlanta Fed projecting a 3.1% growth in U.S. GDP for the third quarter