Happy Employees Working At Their Laptops In The Office

With 187,000 new jobs in August, the U.S. labor market is in a sweet spot, economists say.

It might not look that way to workers or job-seekers: wages are growing at their slowest pace in more than 18 months, the number of layoffs is increasing, and the number of job postings has fallen to its lowest level since early 2021.

“The labor market was sprinting last year and now it’s getting closer to a marathon pace,” Nick Bunker, research chief at the Indeed Hiring Lab, wrote in a recent note. “A slowdown is welcome; it’s the only way to go the distance.”

“It’s not yet the 2019 labor market, but it’s darn close to it,” chief economist Gregory Daco at EY said to Bloomberg. “We’re not seeing any worrisome signs that would indicate a recession is around the corner.”

“The labor market overall is continuing to soar at an ideal cruising altitude—high enough to keep the unemployment rate low while creating more opportunities for workers to come in off the sidelines, but low enough so as not to cause a resurgence of inflation,” Julia Pollack, ZipRecruiter’s head economist, told Bloomberg.

Unemployment rose to 3.8 percent, due largely to more workers re-entering the labor force. The number of people of prime working age with a job or actively looking for one reached 62.8 percent last month, the most since February 2020, the month before COVID arrived in the U.S.

However, the good times might not last.

Job growth was muted by Hollywood’s strike by writers and performers. Trucking firm Yellow went bust, dumping 30,000 workers onto the labor market. U.S. auto workers could strike this fall and the returning threat of a U.S. government shutdown also could darken the employment horizon.

TREND FORECAST: Where employment will go will depend on what the Federal Reserve does next week. If they keep interest rates where they are, which they are expected to do, unemployment numbers will continue to rise due to high-interest rates and an economic slowdown. Should they raise them in the coming months, the employment numbers will rapidly rise. We also maintain our forecast that the Feds will lower interest rates in the run-up to the 2024 race for the White House.

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