The Fed's going to love this. The unemployment rate rises as 736,000 people enter the workforce, enlarging the output gap and driving average hourly earnings growth down to the lowest rate in 19 months. And JOLTS jobs openings are suddenly back below trend. There's been no reason (by our reasoning) for the last few rate hike, and now there's good reason (by the Fed's reasoning) for further ones.
What you’re not hearing about how the not-tight labor market just got even less tight
Friday, September 1, 2023
Who knew? Wage gains slow as workers flood into the labor force from the sidelines.
Update to Strategic View
187,000 net payrolls is diminished by downward revisions of 110,000 to the two previous months. But virtually all the gains were private payrolls, where revisions were less severe. The labor force grew by 736,000, of whom two thirds were not immediately employed – so the number of unemployed rose, lifting the unemployment rate to 3.79%. It wasn’t excessive wage growth that lured workers back into the labor market, because average hourly earnings grew at the slowest pace in 19 months. The labor force is now at an all-time high, and the highest above its 20-year trend for half a century. This would seem to reverse the post-GFC flattening of labor force trend growth, and point to the post-pandemic productivity-led boom we have forecasted for three years. This could not happen if the labor market were tight as Powell always says. It is extremely loose. The expansion of the labor force and the slowing of wage gains should be enough to mean that the Fed’s hiking cycle is already over.