The U.S. Labor Market Chart Book is a deep dive into labor market conditions, which continue to signal overwhelming tightness, putting upward pressure on wage growth and inflation despite the Federal Reserve’s hawkish stance. The path to balancing the supply and demand for labor includes two main scenarios – the preferred scenario increases labor supply while the second transpires through a decline in labor demand.
Chart Content: U.S. Employees on Nonfarm Payrolls
Chart Significance: Nonfarm payrolls increased by a stronger than expected 263,000 in September, bringing the total number of employees on business payrolls to over 153 million, more than surpassing the pre-pandemic peak. While the September monthly change in nonfarm payrolls is lower than its 2022 and 2021 averages (439,000 and 562,000, respectively), it highlights that labor market conditions remain exceptionally tight.
Chart Content: U.S. Unemployment Rate
Chart Significance: The unemployment rate unexpectedly returned to a historic low of 3.5% in September, falling from 3.7% in August as labor force participation declined. The current unemployment rate is below the Federal Reserve’s mandate of “full employment” – the highest level of employment the economy can sustain without generating unwelcome inflation. Full employment is generally believed to be around 4%.
Chart Content: U.S. Labor Force Participation Rate
Chart Significance: The labor force participation rate – the share of the population that is working or looking for work – eased to 62.3% in September and remains well below the 63.4% at the start of the COVID pandemic in February 2020. This gap is generally attributed to aging demographics, early retirements, health concerns, higher spousal salaries, and childcare. A recovery in the labor force participation rate would be a welcome sign for the U.S. economy and financial markets, creating labor market slack and loosening labor market conditions.
Chart Content: U.S. Job Openings and U.S. Job Openings per Unemployed Worker
Chart Significance: U.S. job openings – which include newly created jobs and unoccupied positions where an employer is taking specific actions to fill the positions – showed signs of cooling in August. The number of job openings declined by 1.1 million and vacancies per unemployed worker fell to 1.67 from 1.97 the month prior. While the adjustment process lower is clearly underway, the abundance of job openings remains elevated (compared to pre-pandemic levels) and raises the likelihood that the Federal Reserve achieves a soft landing by increasing labor market slack without generating significant demand destruction.
Chart Content: U.S. Initial Jobless Claims and U.S. Continuing Jobless Claims
Chart Significance: Jobless claims continue to linger near historically low levels, signaling continued labor market tightness. Continuing claims remain below the pre-pandemic average as unemployed workers generally continue to find jobs with relative ease.
Chart Content: Conference Board Consumer Confidence Survey – Share of Respondents Saying Jobs are Plentiful verses Jobs are Hard to Get
Chart Significance: While respondents saying that jobs are plentiful peaked at 57% in March of 2022, September’s reading of 49% remains above 2019’s pre-pandemic average of 46%. The share of respondents saying that jobs are hard to get fell to 11% in September, below 2019’s pre-pandemic average of 13%. Both indicators provide evidence that consumers remain optimistic about employment prospects.
Chart Content: U.S. Average Hourly Earnings Month-over-Month and Year-over-Year
Chart Significance: Average hourly earnings increased 0.3% in September from the prior month and rose 5% from a year earlier, a slight deceleration from the prior month but still historically elevated. The solid increase suggests the Federal Reserve will have to continue to raise its Federal Funds rate aggressively as it aims to cool rapid wage growth and ultimately, inflation.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in the presentation may not develop as predicted.
All data is sourced from Bloomberg, through the release of monthly figures from the U.S. Bureau of Labor Statistics or from the Federal Reserve and any of its affiliated regional locations.