Job growth was lackluster last year in the United States, but signs of stabilization, if not a rebound, were starting to emerge.
Now, the expanding conflict in the Middle East not only interrupts that potential progress, but also threatens to knock the labor market further off course.
Since the war began, the effective closure of the Strait of Hormuz has increased oil prices, hampered the supply chain and pushed up the cost of gasoline. Inflation fears have heightened, as has uncertainty. That’s a dynamic that could strangle the labor market.
“If the Strait of Hormuz remains closed and the oil price stays above $100 through April, then I think it’s a game-changer,” said Heather Long, chief economist at Navy Federal Credit Union. “Then you’re talking about a very different economy, then you’re talking about layoffs re-entering the picture.”
The listless, anemic, “low-hire, low-fire” labor market dynamic is expected to persist — for now.
“Uncertainty is delaying, not canceling, hiring plans,” Gregory Daco, chief economist at EY-Parthenon, told CNN last week.
Daco currently expects a “jobless” expansion, with employment gains of around 20,000 per month in the first half of the year and unemployment (currently at 4.4%) drifting toward 4.7% by the end of the year.
“With recession odds around 40%, the risk is that a prolonged pause in hiring eventually turns into more visible softening,” he wrote. “For now, it’s still a cooling, not a cracking. But if uncertainty were to re-escalate, those cracks could emerge by late-spring.”
Read more about how the war could impact the US job market here.
