Don’t be fooled by the seemingly upbeat employment data over the Labor Day weekend.

Yes U.S. economy adds 187,000 jobs in August 2023 – Faster than July’s revised 157,000 gain and even higher than most Analysts expect this month. Yes, most industries saw gains, with health care and social assistance up 97,300 jobs, leisure and hospitality up 40,000, construction up 22,000 and general manufacturing up 16,000.

but there are enough Data released by the Bureau of Labor Statistics On September 1st, give “Jeremiah“In us economists. I’ll explain.

While job creation increased, the unemployment rate also rose, inching up 0.3% to 3.8% from July.and average hourly earnings Up just 0.2% for the month to $33.82 – Calculates a rather paltry 8 cent increase.

To me, that doesn’t mean the job market is move at a healthy paceIt also showed other signs, as some said: a continued economic slowdown.

look at long-term trends

Overall, the fact that job growth is slightly faster than expected does not suggest that the economy is accelerating and that inflation will spike again anytime soon. Instead, it mainly illustrates the difficulty of predicting month-to-month movements.There may be good reason to think that economics is sometimes Known as “dull science”’ – We’re not always that good at determining what’s going to happen in the short term.

Of course, monthly data have their place in assessing and guiding policy. But focusing on just one month can be misleading because the data can be very volatile.

The underlying trend is more important. This is where I see signs of slowing down.

In 2022, labor demand (measured by job vacancies plus nonfarm payrolls) exceeded labor supply, measured by labor force.In other words, there are There are more job openings than there are people willing to fill Position.

As a result, we see a 5.1% increase in labor income compared to 2021. That’s good news for employees, but not for the Fed: Rising wages combined with supply chain disruptions and the fallout from the Ukraine war mean inflation, as measured by consumer price index growth, will rise 7.7% in 2022.

In order to curb inflation, the Federal Reserve launched a program of aggressive interest rate hikes. This leads to a broad economic slowdown in early 2023. The real estate market cooled. Construction and related markets slowed down.

But now the supply of labor exceeds the demand for labor—there are more people looking for work than there are vacancies.

According to data for the first seven months of 2023, salary increase Compared to 2022, inflation has slowed to 3.4%, and headline inflation has also slowed to 3.5%.

So where is the economy headed?data advantage indicate an overall slowdown in the economy.As a result, some believe that the U.S. economy may Towards a “soft landing”with inflation hitting 2% to 2.5% as the U.S. avoids recession.

But the economy isn’t completely out of the woods yet in terms of the likelihood of a recession. True, inflation is falling.But income growth has generally been slower than inflation, leading to loss of purchasing power For consumers.

The reduction in cash being used to buy goods does not appear to be affecting the economy yet. expenditures According to my calculations, the first 7 months of 2023 are up 1.9% from the previous year. However, there is evidence that much of this is due to consumers buying on credit.credit card debt reached A staggering $1.3 trillion Q2 2023.

This is not sustainable. Sometime soon, consumer spending will have to slow down.Given that consumer spending represents About two-thirds of the total GDPa recession is still possible.

My best guess right now is that a recession is most likely in early 2024, right after the usual holiday spending spree. But fortunately, a sharp contraction is unlikely due to the Fed’s recent efforts to gradually slow the economy.

Christopher Decker is a professor of economics, University of Nebraska at Omaha.

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