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    Global Macro Research: US labor market is finely balanced

    Global Macro Research: US labor market is finely balanced

    25 October 2024 Economics

    The US labour market has proved remarkably resilient this cycle, but the demand and supply of labour appears finely balanced and at risk of tipping into recessionary conditions. However, the Federal Reserve (Fed) now appears to be focusing on supporting the labor market and we believe this will keep an economic ‘soft landing’ in sight.

    Key takeaways:

    • While the economy continues to add jobs, the pace of job creation is slowing while unemployment is rising. The rising joblessness rate has even triggered a closely watched recession indicator with a near-perfect track record: the Sahm Rule.
    • However, rising unemployment has so far mainly been due to an expansion in labor supply, rather than an increase in layoffs, which have remained relatively low.
    • Moderating inflation is allowing the Fed to turn its attention to the labor market at a time when labor demand and supply conditions appear finely balanced. Although we expect the Fed to achieve an elusive ‘soft landing’, we cannot rule out the possibility that the Fed might already be behind the curve.
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