A calm before the storm?

A labor market report scheduled for release this Friday will show that the US economy continued to add jobs at a strong pace in September. But this may be the last good jobs report before the coming economic storm, a recession that could lead to job losses.

So says Dan North, senior economist at Allianz Trade. It expects a headline of 300,000 jobs, very close to the consensus estimate of 290,000 jobs, as reported by Trading Economics.

Upbeat expectations for the September jobs report are based on several factors. One is the continued decline in jobless claims, which fell below 200,000 last week. The other is increased jobs, which totaled 10.1 million in August 2022.

Despite high levels of job openings, the US economy has not gained new jobs since the pandemic, and many jobs are either part-time or temporary.

“While the overall labor market remains tight and employers compete for staff, inflationary pressures are steadily pushing more Americans to seek flexible and temporary work as a way to supplement their earnings,” said Stacey Lane, US managing director at Indeed Flex. a construction site, he said International Business Times in an email.

North sees an end to job growth in the near future. “So while we may continue to see some strong job gains for the next few months, the party will soon be over,” he told IBT in an email.

US economic growth, the ultimate driver of job growth, has already sunk into negative territory, with a full-blown recession underway. This is due to the Fed’s sharp rate hikes, which are starting to affect cyclical sectors.

But there are a few more things to look out for in Friday’s coverage. One is rising wages, a good indicator of future inflation, as producers pass on higher labor costs to consumers with price increases. Trading Economics expects hourly earnings to rise 5.2% in September, in line with August’s figure, meaning wage pressures remain high.

In recent months, wages have been rising but still lagging inflation, meaning the labor market may not be as strong as it seems.

The other is the unemployment rate, which in recent months has reached multi-year lows. This raises concerns about a wage-price spiral, which could add fuel to already high inflation.

North expects things to change sharply on that front, with unemployment rising from 3.5% to 3.7% as more unemployed people enter the workforce.

In addition, he sees further evidence of a slowdown in the labor market in the coming months. Such as a decline in both openings and hires and a narrowing of the spread between the two as indicated in recent JOLTs reports. For example, in August, the number of US jobs fell to 10.1 million, the lowest since June 2021 and well below the record level of 11.9 million last March.

“And most ominously, major companies from Ford to Credit Suisse, JP Morgan to Tencent are laying off workers – they see a storm coming,” North added.

A job application form is displayed during a restaurant career fair organized by industry group High Road Restaurants in New York, U.S., May 13, 2021.

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