This is the only part of the labor market where workers have less bargaining power

Friday’s jobs report showed surprising strength in the labor market, but there are signs that all may not be well for all workers.

Nick Bunker, an economist at Indeed Hiring Lab, said take-offs in low-wage sectors such as retail, entertainment and hospitality are slowing.

This means that people working in these sectors may have less bargaining power than before, he told MarketWatch.

Here’s why: people leaving their jobs is an indicator of job seekers’ confidence in their ability to get out and find new jobs. Smoking cessation rates can also predict what will happen to wage growth in the coming months.

“The high dropout rate means that there are more workers than usual expressing their desires by leaving their old jobs. The vast majority of them go on to new jobs,” Bunker said.

Sure, the smoking cessation rate is still higher than pre-pandemic rates, and people are still switching jobs for higher wages, Bunker said, but the cooling trend is very clear, particularly in retail.

The smoking cessation rate in the leisure, hospitality and retail sectors peaked near the end of 2021 and early 2022, and began declining at the start of the year, according to an Indeed analysis based on data from the Bureau of Labor Statistics.

The US labor market was strong in July, adding 528,000 new jobs, which came as a surprise amid layoffs in the technology sector and elsewhere. Economists expected nearly 300,000 new jobs. The unemployment rate also fell to 3.5% from 3.6% a month ago, according to data from the Bureau of Labor Statistics released Friday.

Economists have said that the labor market is among the strongest of the past 50 years.

But there were conflicting signals in the data. For example, slowing wage gains for lower wage industries continued in July, Bunker noted. Growth in average hourly earnings of low-wage production workers has been higher than that of middle-wage workers and high-wage workers since the beginning of 2021, but has declined since the beginning of this year. It was 13% in December and has fallen to about 6.2% as of June, according to Indeed analysis.

The number of people who left their jobs in June fell slightly to 4.23 million, according to the latest Labor Department data. A year ago, the number of smoking cessation for the first time reached 4 million, a trend some called the “Great Resignation”, while others called the “Great Renegotiation.” The average level of smoking cessation before the pandemic was about 3 million each month.

Workers in retail, restaurants and hospitality have led the way to quit their jobs. Most of the smoking cessation cases that emerged in the spring of 2021 occurred in those sectors. The demand for labor in those industries boomed as people were eating out and visiting stores in the wake of vaccinations and the reopening of the economy.

Quitting smoking can pay off. About 60% of workers who changed jobs from April 2021 to March 2022 reported seeing their earnings increase, according to a Pew survey.

Nearly half of those changing jobs were earning roughly 10% more than they did a year ago after adjusting for wages for inflation, placing them among a select number of workers whose wages have exceeded inflation.

The cost of living increase was 9.1% in June compared to a year ago, and many Americans are struggling to make ends meet as a result. Some dived into their savings to manage costs while others changed their spending habits or switched to credit cards. The Federal Reserve has raised the federal funds rate four times since March in an effort to tame the 41-year high inflation.

Economists have noted that the effects of inflation, along with higher interest rates, can affect consumer spending.

Retailers are already feeling the pinch, with Walmart WMT,
+ 0.80%
It issued a warning about lower-than-expected earnings and others reported losses in the last quarter caused by inflation and higher expenditures.

If the economy goes into recession, the current high demand for workers in warehouses, retail and restaurants could protect these workers from job losses, William Lee, chief economist at the Milken Institute, told MarketWatch recently. But he said entry-level white-collar workers could see layoffs as companies reshape their business models.

Bunker told MarketWatch that the big question right now is how companies will respond to waning consumer demand. Employers can either scale back their hiring plans or let employees go.

Although layoffs are common during downturns, he said, since the job market is tight right now, and employers have been having a hard time hiring in the past year or so, employers might consider “surmounting this downturn in demand.” And stick to the workers that they have. He said this is called “labour hoarding.”

“If it does, it will give you an indication that we will probably see less damage to low-wage workers as we have seen in the past, especially if there are sectors that are understaffed at the moment,” Bunker said.

Earlier this week, Walmart announced that it was laying off 200 employees at the company to restructure the business.

Walmart spokesperson Jimmy Carter told MarketWatch in an email that the move is one of many the company is taking to modernize its structure and better serve its customers and the broader business community. He said Walmart is investing more in key growth areas such as e-commerce, supply chain, technology, health and wellness, advertising and sales.

“It is also important that as customers continue to evolve, we evolve to ensure that we serve them,” he wrote.

Bunker said the Walmart job cuts offer a glimpse of the pressures facing the retailer right now, but they don’t necessarily indicate distress for the entire economy, noting that “the vast majority of Walmart employees are people who work in physical retail stores.” He said it would be a worrying signal for the entire economy if Walmart were laying off store employees.

“If Walmart says, ‘We’re starting to abandon store partners,’ that would be a sign that they’re starting to think, ‘Well, the demand to come into our stores and buy things is going down so much that we need to let people go. But that’s not what we saw in the ad,” Bunker said.

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