July 30, 2025 • 4 mins
After years of a historically strong labour market, there are now growing signs of softening beneath the surface.
Work opportunities in the US are dwindling amid ongoing economic uncertainty, with the Trump administration's policies contributing to high unemployment figures.
Milford Asset Management expert Brendan Larsen explains further.
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Speaker 1 (00:09):
You're listening to a podcast from News Talk st B.
Follow this and our wide range of podcasts now on iHeartRadio.
Speaker 2 (00:16):
After years of an historically strong US labor market, there
are now growing signs of softening beneath the service Brandan
Larson from Milford Asset Management is with us afternoon, Brandon,
Good evening. Right, let's start a little bit with some
background before we dive into what's actually changed here.
Speaker 1 (00:32):
Yeah.
Speaker 3 (00:32):
Sure, So, I guess over recent years, the US labor
market has been extremely strong. Coming out of COVID, consumers
had a lot of money and a lot of pent
up demand for goods and then eventually services. So this
resulted in a surgeon consumption, which I guess meant that
business has required more and more workers. I guess the
best reflection of this is really looking at demand indicators.
(00:54):
So the Job Openings and Labor Turnover Survey referred to
as JOLTS as probably the best one to look at,
and that surged to a high of twelve million job
openings in twenty twenty two. So for perspective, that implies
two job openings every one unemployed person. The wild demand surged. Initially,
supply of labor was subdued participation rates were low after COVID,
(01:16):
immigration was weak with travel, and so that meant that
the demand massively ours striped supply, and the unemployment rate
quickly declined from that thirteen percent peak in twenty twenty
to a trough of three and a half percent in
twenty twenty two.
Speaker 2 (01:28):
Yeah, the supply picture changed quite a lot as the
country's reopened after COVID.
Speaker 1 (01:32):
Ay.
Speaker 3 (01:33):
Yeah, that's right here. The immigration surged in the US
actually after twenty twenty two. So the Biden government in
particular were really keen to get migrants into the US
to support growth. So we saw immigration reach a peak
of three and a half million in twenty twenty three.
So that's three and a half times the average rate
pre pandemic. And so that did two things really for
(01:54):
the US economy. One that added significant supply of labor
to a very tight jobs market, and two, it meant
there were more people in the US consuming goods and services,
which obviously boosted GDP like the Biden government wanted.
Speaker 2 (02:07):
And so how President Trump's focus on reducing immigration changing
this up.
Speaker 3 (02:12):
Yeah, so we're actually seeing that immigration crackdown already show
up in the data. So net immigration is annualizing at
a pace of about five hundred thousand at the moment,
and so that's obviously done materially from that three and
a half million level of twenty twenty three, and half
the pace of the pre pandemic trend. But this lower
immigration is also masking some softness in the demand side
(02:33):
of the US labor market. So overnight we got updated
JOLTS data that showed vacancy's decline to seven point four million,
so that ratio is now shifted to one job opening
for every one unemployed person, and the trend in recent
payroll data is also declined. But with this huge decline
in immigration, we're seeing really the opposite effect of what
occurred in twenty twenty two, so this removal of supply
(02:56):
of laborer from the market. So that means despite falling
demand for labor, supply is falling and therefore the unemployment
rate isn't rising as much as one would expect, and
hence this masking of some of this weakness. We actually
get new data later this week on payrolls, and that's
really quite important for a direction of monetary policy in
the US.
Speaker 2 (03:15):
And how does it compare if you have a look
at what's going on with the New Zealand labor market.
Speaker 3 (03:20):
Look, as we know, the New Zealand economy remains quite
weak and this is also reflected in the labor market.
So the unemployment rate in New Zealand has risen from
a low of about three point two percent in twenty
twenty two to five point one percent in Q one
this year. On the demand side, job advertisements had stabilized,
but data this week actually confirmed a renewed down trend.
(03:43):
There are actually some similarities as well between the New
Zealand and US labor markets, so supply of labor is
also reducing in New Zealand, which is partially balancing that
decline and demand. For example, the unemployment rate in Q
one this year would have actually been higher if it
wasn't for the decline of participation, and so I think
that really reflects two important things. One, job seekers are
(04:05):
opting out of the market given difficulties finding work, and
two immigration is now a lot lower in New Zealand
than what it had been. The good news is that
the further weakening in the labor market and a slow
economic recovery and an inflation data that is within the
band does mean that we think there is continued scope
for more rec cuts from the IBNZ.
Speaker 2 (04:24):
Excellent's what we want to Hear Brandan, Thank you, Brendan
Lars and Milford Asset Management.
Speaker 1 (04:28):
For more from News Talk st B, listen live on
air or online, and keep our shows with you wherever
you go with our podcasts on iHeartRadio
You're listening to a podcast from News Talk st B.
Follow this and our wide range of podcasts now on iHeartRadio.
Speaker 2 (00:16):
After years of an historically strong US labor market, there
are now growing signs of softening beneath the service Brandan
Larson from Milford Asset Management is with us afternoon, Brandon,
Good evening. Right, let's start a little bit with some
background before we dive into what's actually changed here.
Speaker 1 (00:32):
Yeah.
Speaker 3 (00:32):
Sure, So, I guess over recent years, the US labor
market has been extremely strong. Coming out of COVID, consumers
had a lot of money and a lot of pent
up demand for goods and then eventually services. So this
resulted in a surgeon consumption, which I guess meant that
business has required more and more workers. I guess the
best reflection of this is really looking at demand indicators.
(00:54):
So the Job Openings and Labor Turnover Survey referred to
as JOLTS as probably the best one to look at,
and that surged to a high of twelve million job
openings in twenty twenty two. So for perspective, that implies
two job openings every one unemployed person. The wild demand surged. Initially,
supply of labor was subdued participation rates were low after COVID,
(01:16):
immigration was weak with travel, and so that meant that
the demand massively ours striped supply, and the unemployment rate
quickly declined from that thirteen percent peak in twenty twenty
to a trough of three and a half percent in
twenty twenty two.
Speaker 2 (01:28):
Yeah, the supply picture changed quite a lot as the
country's reopened after COVID.
Speaker 1 (01:32):
Ay.
Speaker 3 (01:33):
Yeah, that's right here. The immigration surged in the US
actually after twenty twenty two. So the Biden government in
particular were really keen to get migrants into the US
to support growth. So we saw immigration reach a peak
of three and a half million in twenty twenty three.
So that's three and a half times the average rate
pre pandemic. And so that did two things really for
(01:54):
the US economy. One that added significant supply of labor
to a very tight jobs market, and two, it meant
there were more people in the US consuming goods and services,
which obviously boosted GDP like the Biden government wanted.
Speaker 2 (02:07):
And so how President Trump's focus on reducing immigration changing
this up.
Speaker 3 (02:12):
Yeah, so we're actually seeing that immigration crackdown already show
up in the data. So net immigration is annualizing at
a pace of about five hundred thousand at the moment,
and so that's obviously done materially from that three and
a half million level of twenty twenty three, and half
the pace of the pre pandemic trend. But this lower
immigration is also masking some softness in the demand side
(02:33):
of the US labor market. So overnight we got updated
JOLTS data that showed vacancy's decline to seven point four million,
so that ratio is now shifted to one job opening
for every one unemployed person, and the trend in recent
payroll data is also declined. But with this huge decline
in immigration, we're seeing really the opposite effect of what
occurred in twenty twenty two, so this removal of supply
(02:56):
of laborer from the market. So that means despite falling
demand for labor, supply is falling and therefore the unemployment
rate isn't rising as much as one would expect, and
hence this masking of some of this weakness. We actually
get new data later this week on payrolls, and that's
really quite important for a direction of monetary policy in
the US.
Speaker 2 (03:15):
And how does it compare if you have a look
at what's going on with the New Zealand labor market.
Speaker 3 (03:20):
Look, as we know, the New Zealand economy remains quite
weak and this is also reflected in the labor market.
So the unemployment rate in New Zealand has risen from
a low of about three point two percent in twenty
twenty two to five point one percent in Q one
this year. On the demand side, job advertisements had stabilized,
but data this week actually confirmed a renewed down trend.
(03:43):
There are actually some similarities as well between the New
Zealand and US labor markets, so supply of labor is
also reducing in New Zealand, which is partially balancing that
decline and demand. For example, the unemployment rate in Q
one this year would have actually been higher if it
wasn't for the decline of participation, and so I think
that really reflects two important things. One, job seekers are
(04:05):
opting out of the market given difficulties finding work, and
two immigration is now a lot lower in New Zealand
than what it had been. The good news is that
the further weakening in the labor market and a slow
economic recovery and an inflation data that is within the
band does mean that we think there is continued scope
for more rec cuts from the IBNZ.
Speaker 2 (04:24):
Excellent's what we want to Hear Brandan, Thank you, Brendan
Lars and Milford Asset Management.
Speaker 1 (04:28):
For more from News Talk st B, listen live on
air or online, and keep our shows with you wherever
you go with our podcasts on iHeartRadio
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