- The US job market is flashing signs that hiring is about to pick up, according to Torsten Slok.
- The Apollo chief economist said strong spending should boost the job market.
- Slok predicted the US could add as many as 300,000 new jobs this month.
The US labor market is due for a rebound, with hiring poised to pick up as soon as this month, according to Apollo Global Management chief economist, Torsten Slok.
In a note to clients, Slok issued a more positive outlook on the US job market, even as hiring has slowed this year. His outlook is largely tied to increased spending, which should fuel economic growth spur more hiring, he said.
"It is inconsistent to say that the incoming economic data is strong but the labor market is weakening," Slok wrote. "With the data for consumer spending, capex spending, and government spending still strong, we should soon begin to see a rebound in nonfarm payrolls and a decline in the unemployment rate."
The US added 142,000 jobs in September, lower than the 164,000 jobs economists expected.
However, consumption and business spending data have been strong in recent months. Retail sales unexpectedly rose in August, while capital expenditures across all sectors rose to $8.2 trillion last quarter, according to Fed data.
Slok pointed to four data points that suggest hiring is bound to rev up:
1. Jobless claims are falling
Jobless claims slumped to 219,000 the last week, according to the Bureau of Labor Statistics. Given the historical relationship between jobless claims and new jobs added, that suggests the economy could see as many as 300,000 jobs added in September, Slok predicted, more than doubling the prior month's gains.
2. GDP is rising
The economy continues to grow, which is good news for the labor outlook. GDP is expected to grow 2.9% this quarter, according to the Atlanta Fed's latest GDPNow reading, about the same pace recorded during the second quarter.
If GDP does grow at that pace, the economy could be on track to create 240,000 jobs per month over the third quarter, Slok estimated, given the historical relationship between GDP and nonfarm payrolls.
"In other words, we could see a sharp rebound in job growth in September from the low levels we saw in July and August," he added.
3. Layoffs have been falling
Firms have been easing up on layoffs. That's a positive sign for the job market, given that firings are the leading indicator of a coming downturn, Slok said, citing a recent Fed paper that examined layoffs in the business cycle.
Layoff announcements surged during the month of August, but firms had backed away from job cuts over the four preceding months, according to data from the consultancy Challenger, Gray, & Christmas. Since the start of the year, companies have announced 536,421 job cuts, a 3% decline compared to job cuts announced in the same period last year.
The quits rate, meanwhile, ticked higher in July, signaling more confidence among workers.
"During recessions, quits decline as layoffs increase. But this is not what the latest data for layoffs and quits to non-participation show," he added.
4. Mortgage rates are coming down
Mortgage rates have been on the downtrend this year, with the 30-year fixed rate easing to 6.09% the last week, according to Freddie Mac data. If the 30-year fixed rate slumps to around 5%, that could that could spark a rebound in home sales, providing a boost to the economy and job market, Slok said.
"With financial conditions easing further because of the 50bps Fed cut and still strong tailwinds to economic growth from the CHIPS Act, the IRA, the Infrastructure Act, strong AI spending, and strong defense spending, the bottom line is that there are no signs of the economy entering a recession," Slok wrote. "In particular jobless claims and the Atlanta Fed GDP Now, are pointing to a reacceleration in employment growth over the coming months," he later added.
The outlook for the job market, though, remains mixed, with some commentators warning that hiring could continue to slow due to the lagged impact of the Fed's rate hikes. David Rosenberg, one economist who's been calling for a recession for months, predicted the economy could start losing jobs by the end of the year, sending the unemployment rate past 5%.