How much will the labor market weaken?
we, The most important jobs report in years.
The Bureau of Labor Statistics said on Friday Employer-household twin survey The government prefers to call this the “employment situation,” but we tend to call it the “jobs report.”
Surveys of employers are not helpful, “Establishment Survey” or “payroll survey,” which shows how total payrolls have changed from the previous month. This is the source of headlines like how many jobs the U.S. economy added in a month, or how many jobs it lost in a recession. It also gives details about which areas of the economy gained jobs, such as manufacturing, leisure and hospitality, and health and social services.
A survey of American households found thatHousehold Survey— A source for information on unemployment rates, labor force participation rates, and the number of workers discouraged from working.
The survey has received some attention over the past few years, but has lagged behind government inflation reports. But now that inflation is receding and unemployment is rising, Employment situation is back in the spotlight.
One reason analysts and investors were focused on employment was because it was also the focus of Jerome Powell and his colleagues at the Federal Reserve. In his Jackson Hole speech, Powell made it clear: The Federal Reserve wants to support the labor market. And any further softening would not be welcomed.
“We do not seek nor welcome a further weakening of labor market conditions,” Powell said.
Sam Recession Indicator Trips
There is no question The labor market has slowed significantlyJob openings fell to 7.7 million as of the end of July, near pre-pandemic levels and well below the peak of 12 million for 2022. The unemployment rate rose to 4.3% in July from 3.4% in April 2023.
Last month, the unemployment rate crossed the threshold of the Sarm rule, a key recession indicator, pushing the three-month average more than half a percentage point above the lowest three-month average in the past year. Even economist Claudia Sarm, who created the Sarm rule, has said this time may be different, but the Sarm line has certainly been crossed. It raised concerns that the economy may be weaker than expected. Just a few months ago.
it is Large increases in unemployment are rare unless the economy falls into a recession.Moreover, rising unemployment has historically been a vicious cycle: Fewer people working typically leads to less spending, which leads to more layoffs, which in turn leads to increased fears about job security, which in turn leads to preemptive cuts in spending, which leads to more layoffs.
But so far, There were very few layoffsAt least, that's the case when judging by weekly unemployment claims numbers: Last week, for example, the government recorded about 227,000 first-time claims for unemployment benefits, roughly the same as the number of claims in the final year of the Trump administration before the pandemic.
Wall Street expects the business survey to show payrolls rose by 100,000 to 195,000 in August, but estimates vary widely. This shows how difficult it is to predict economic data right now.The median forecast is 160,000. The unemployment rate is expected to fall to 4.2%, with a range of forecasts ranging from a fall of 4.1% to a rise of 4.4%.
It is often said that the Federal Reserve has a dual mandate to promote price stability and maximum employment. Mie's Mission Under the law, it is also envisaged To promote “moderate interest rates.” But nobody seems to remember that part of the mission. If that were to become a function of the Fed's mission, one wonders whether a zero interest rate policy, etc. would be permissible.
The Fed sees its mission as having changed from fighting inflation to fighting unemployment. If it sees a big disappointment in employment data or if the unemployment rate rises more than expected, it will Trigger a 50 basis point interest rate cut by the Federal Reserve The meeting will be held later this month.
