‘Stall Speed’ in US Labor Market Could Cause Self-Reinforcing Job Cuts

It’s been a tough year for the job market. And believe it or not, it could be about to get a lot worse.

That’s the opinion of a small but vocal group of strategists and economists on Wall Street, who believe that the labor market could be on the precipice of “stall speed,” a co-opted aviation term, which refers to a slowdown in job creation that could hasten an economic downturn.

Peter Berezin, the chief global strategist at BCA Research, says he believes the job market is currently teetering on the cusp of stall speed. While he told Business Insider that the term has a somewhat loose definition, he personally sees it as a job market so weak that US consumers start to pull back on spending, which hurts firms and sparks even more layoffs.

“You get a feedback loop,” Berezin said. “People get nervous, they spend less, their friends see that their family members or friends are losing their jobs, so they spend less, and that becomes self-reinforcing.”

Under stall speed, Berezin sees the US unemployment rate spiking as high as 6%, up from the 4.2% at present time. The jobless rate could also remain elevated for around a year, he said, before the Fed cutting interest rates starts to boost hiring again.

While Berezin’s outlook leans on the more bearish end of Wall Street, other forecasters say they also see the warning signs of such a slowdown in the labor market brewing.

A team of economists at JPMorgan recently said that stall speed was on their radar. In a note to clients, the firm pointed to lackluster jobs data and comments from Fed Chair Powell, who made a rare comment about the risk of “higher layoffs and rising unemployment” following the central bank’s July policy meeting.

“In his speech, he reinforced our view that the July unemployment report represents a stall speed alert,” economists led by Bruce Kasman said.

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Goldman Sachs also said it saw the risk of the job market hitting stall speed, which it defined as “a pace of job creation weak enough to trigger a self-reinforcing rise in unemployment,” should GDP growth in the economy remain weak.

Fed Governor Chris Waller also warned of such a reality in a recent statement explaining why he dissented from the FOMC’s decision to keep interest rates steady at its July policy meeting.

“My final reason to favor a cut now is that while the labor market looks fine on the surface, once we account for expected data revisions, private-sector payroll growth is near stall speed, and other data suggest that the downside risks to the labor market have increased,” he said. “We should not wait until the labor market deteriorates before we cut the policy rate.”

A vicious cycle

The US job market hasn’t exactly been a perfect example of fortitude. While the unemployment rate remains near record lows, hiring has slowed significantly in 2025 and proven to be much weaker than expected in recent months.

The US added 73,000 jobs in July, while May and June job gains were revised downward by a collective 258,000.

Private payrolls data, while choppy, has also shown reason for some concern. Private employment surged by 104,000 in July, but after losing 33,000 jobs in June, the first monthly loss recorded in two years.

Berezin says that data is at risk of further deterioration. He told BI he expects more downward revisions during the August jobs report, slated for this Friday. Job gains for May and June could potentially be revised further, he said, adding that it wouldn’t surprise him to see that the economy outright lost jobs during those months.

“Now, if the August data is also weak, then I think the whole recession narrative comes back into the fore,” he said of the August jobs report, which markets are expecting next Friday.

Jonathan Millar, a senior US economist at Barclays, said he was also expecting bad news from the Bureau of Labor Statistics’ annual revision of jobs data in September. That revision looks like it’s going to be big, he said, speculating that the economy may have added something like 900,000 fewer jobs than was initially reported from April 2024 to March of this year.

A recession signal?

Should the job market enter that vicious cycle, a recession is practically inevitable, Berezin said. He estimated there was a 60% chance the US economy will enter a recession sometime in the next 12 months.

“We’re in that vulnerability zone where if the economy is hit by some sort of a shock, then it’s very easy to see the unemployment rate really moving higher in a way that was much more difficult to envision a few years ago,” Berezin added. “It’s kind of hard to avoid a recession once the unemployment just can’t go down any further,” he added.

Barclays is also seeing an elevated risk of a recession over the next two years. While the bank’s base case is that the US will avoid a downturn, its economists estimated that the economy faces more than a 33% chance of entering a recession by mid-2026, and more than a 50% chance of it happening by mid-2027.

Most forecasters on Wall Street are generally expecting the US to avoid a recession, but the outlook will hinge on how strong the incoming economic data looks. In the job market, investors are eyeing three key indicators in the coming week:

ADP Private Payrolls (Thursday)Initial jobless claims (Thursday)US jobs report (Friday)