![]() (2) Includes wage and salary data from the Current Employment Statistics survey, except private households, which is from the Current Populations Survey. (1) Employment data for wage and salary workers are from the BLS Current Employment Statistics survey, which counts jobs, whereas self-employed and agriculture, forestry, fishing, and hunting are from the Current Population Survey (household survey), which counts workers. Services-providing, excluding special industriesĪgriculture, forestry, fishing, and hunting (3) ![]() The labor market is often a lagging economic indicator and, as the economy confronts multiple headwinds, it remains to be seen whether the labor market can avoid a recession.Other available formats: ( XLSX) Table 2.1 Employment by major industry sector Additionally, the war in Ukraine, a slowing global economy and the ongoing pandemic remain significant risk factors looming over the economy. As we approach the end of the year, restrictive monetary policy will begin to bite more, especially in interest-rate sensitive sectors. The question remains how long the job market can remain hot as the Fed continues to pour on cool water. The labor market is still hot, with job gains well exceeding pre-pandemic levels. A soft landing is not out of the cards yet, but it is looking increasingly difficult as the Fed hardens its resolve to bring inflation down even at the cost of economic pain in the labor market. While the Fed’s projections should not be regarded as a forecast, this does signal that the Fed is increasingly recognizing the likelihood of rising unemployment rates as a result of their monetary policy. since 1948-a similar observation to the Sahm Rule. ![]() An unemployment rate increase of that size has coincided with all 13 recessions in the U.S. ![]() A 0.6 percentage point increase in the unemployment rate from Q4 2022 to Q4 2023 would be a red flag for the economy. The Federal Reserve’s economic projections for Q4 2023 project an unemployment rate of 4.4 percent, a significant increase from 3.7 percent in August and their projection of 3.8 percent for Q4 2022. As the economy slows, it will be important to watch whether racial inequality widens, especially if the pandemic persists.įederal Reserve Unemployment Projections Point to Economic Red Flag Black workers are three times more likely to report the pandemic as their reason for remaining out of the labor force, likely in part due to the disproportionate health impact of COVID-19. While it’s not immediately clear what drove the drop in Black labor force participation in recent months, one notable contributing factor is the ongoing pandemic. As the economy shifts into a lower gear, there is a risk that a slowdown has a disproportionate impact on Black workers. This was the third month in a row of declines and the lowest level in 2022. One concerning statistic from August’s jobs report was Black labor force participation, which fell to 61.8 percent. Keep an Eye on Black Labor Force Participation Despite an increase in the spring, claims remain near pre-recession levels, signaling that even as the economy slows, employers are hesitant to let go of the workers they do have. UI claims-a very rough proxy for layoffs-are signaling that the labor market remains hot. Unemployment insurance claims have been falling over the last few weeks, with initial claims in the latest data for the week ending Septemat their lowest level since April 2022. Unemployment Insurance Claims Still Show Tight Labor Market Annual average hourly earnings growth will likely decelerate modestly from 5.2 percent in August. The Fed is closely watching the labor market for signs that cooling demand for workers is muting wage growth. ![]() Average hourly earnings growth to slow.The still-hot labor market should still pull workers in off the sideline, but August’s jump in both the labor force participation and unemployment rates is unlikely to repeat. The unemployment rate rose to 3.7 percent in August on the back of rising labor force participation. Job gains slowed in August and, as the labor market shifts into a lower gear, are likely to remain in the same range (around 300,000) for another month. Jobs growth to remain at similar pace.Here are three trends we’ll be watching for in the September jobs report: While the labor market is still healthy, it stands at a crossroads as monetary policy increasingly moves to constrain the labor market. That’s likely to continue in September as the Federal Reserve continues to let air out of the labor market in an attempt to get inflation under control. Last month, the labor market slowed to a cooler pace, consistent with the slowing economy overall, though the labor market overall remains hot. This Friday, the Bureau of Labor Statistics (BLS) will release the September jobs report. ![]()
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