The data, however, does not mince words.
“There is a gradual realization that the idea of being able to reduce labor market tensions by simply limiting the number of job vacancies is over,” said Gregory Daco, chief economist at EY-Parthenon. . “We now have an implicit realization that to cool the labor market will require a significant increase in the unemployment rate and it will require a cooling in job growth with potential job losses.”
Those numbers could go south pretty quickly, Daco said.
“I wouldn’t be surprised if in an environment where companies are more cautious and apply more discretion in their hiring decisions, we could see potential net job losses by the end of the year,” he said. he declared.
“The average workweek in manufacturing has contracted in four of the past six months – a notable sign as companies cut hours before reducing their workforce,” Ozyildirim said in a statement. “Economic activity will continue to slow more broadly across the U.S. economy and is expected to contract. A key driver of this slowdown has been the Federal Reserve’s rapid monetary policy tightening to counter pressures inflationary.”
A myriad of factors at play
The Fed can’t just “click on its heels three times, raise rates and drive inflation down,” Frick said.
“There are a myriad of factors in play right now, and it’s a mistake to think the Fed doesn’t control more than a handful of them,” he said.
“I think the Fed is wrong if they think raising rates even to 4% or more will scare the labor market because we are still more than 4 million jobs below pre-trend. -pandemic, and employers are still making the money, and employers still have to hire people,” Frick said. expect the labor market to soften.”
One of the main reasons Fed Chairman Jerome Powell wants more slack in the labor market is because he fears a tight employment situation will continue to drive up wages, which could then keep inflation high. As the unemployment rate rises, workers lose their bargaining power for higher wages and households reduce spending.
“Powell said inflationary wage increases haven’t happened yet, but he thinks it will happen in the future,” Frick said. “It’s all very theoretical at this point. And I understand that if you want to reduce demand, one way to do that is to increase unemployment…but I really think it’s an open question whether it’s a problem now or not.”
No “painless” way
To that end, American workers might have to bear the brunt of pain for a problem that is not caused by them.
“It’s unfair,” Frick said. “But no one ever said the economy wasn’t sometimes cruel.”
“It’s a very slow level of growth, and it could lead to higher unemployment, but I think that’s something we think we need to have,” Powell said. “We think we also need to have looser conditions in the labor market. We’re never going to say there are too many people working, but the real point is this: inflation, what we hear from people when we meet them is that they are really suffering from inflation.”
“If we want to settle in, pave the way for another period of a very strong labor market, we have to put inflation behind us. I wish there was a painless way to do that. there are none,” he added. .
The next batch of key employment data, including monthly job openings, layoffs and gains, will arrive the first week of October when the Bureau of Labor Statistics releases the Job Openings Survey and labor turnover and the monthly employment report for September.
Unemployment claims data released Thursday showed the number of first jobless claims was 213,000 for the week ended September 17, according to the Labor Department. The previous week’s total of 213,000 was revised down by 5,000. Weekly claims, which remain near some of their lowest levels in months, underscore how tightly employers are clinging to workers while the labor market remains full of opportunities for job seekers.
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