I cover the economy with a focus on the labor market.
Yesterday was the worst day for U.S. stocks in nearly two years. Markets around the globe fell sharply; the S&P 500 index was down 3 percent.
Stock markets are fickle, and their movements can’t tell you much about the health of the economy. Today, the S&P 500 could fall another 3 percent — or it could erase yesterday’s losses.
But yesterday’s tumult reflects an underlying reality: The job market is cooling.
That cool-down was expected, even necessary, after a wild four years: The early pandemic brought astonishing job losses, followed by a frenetic recovery. Now, the unemployment rate, at 4.3 percent, is basically back to normal. But some recent data has alarmed economists, and it helped spark yesterday’s sell-off.
In today’s newsletter, I’ll explain.
The wild ride
Nearly 22 million workers lost their jobs after Covid struck. By April 2020, the unemployment rate — which had been at a five-decade low of 3.5 percent — jumped to nearly 15 percent. Businesses thought many of those layoffs would be temporary. They expected to reopen quickly and bring workers back.
Instead, the pandemic dragged on. By the time vaccines became widely available in early 2021, many businesses found that the employees they had let go were no longer available. Some had found other jobs, changed industries or started businesses of their own. Some didn’t yet feel safe returning to work or couldn’t find child care. Some had retired or returned to their home countries. Some had been killed or disabled by Covid.
The result was a scramble to hire from a limited pool of workers. There were soon two available jobs for every available worker.