The Week in Review: October 10, 2022
Cracks Gradually Form in the Job Market
Last week, the U.S. Bureau of Labor Statistics (BLS) reported that job openings fell by 1.1 million in August to 10.1 million, the second steepest decline on record.
Job growth continues, however, as evidenced by a 263,000 increase in nonfarm payrolls in September (U.S. BLS).
Yet, openings remain quite elevated, as illustrated in Figure 1. It’s not that all workers have their pick of jobs, but many businesses have struggled to fill open positions. We see it in the never-ending stream of help-wanted signs.
For workers, fewer opportunities could eventually create challenges. For investors, who have been battered by steep rate hikes, a slowdown would be welcome news, as the Federal Reserve is trying to slow the economy and rein in inflation.
As Figure 1 highlights, an expanding economy increases openings as businesses hunt for workers.
Declines are typically associated with a weak economy or a recession.
Figure 2 helps explain why so many jobs exist.
Those not working AND not looking for work are over 4 million above the level just prior to the pandemic. It lowers what economists and the U.S. BLS call the labor force participation rate.
In turn, lower participation has helped bring down the unemployment rate. In September, the jobless rate dipped to 3.5% from 3.7% in August (U.S. BLS).
Many have tried to explain why some folks have stayed at home vs. pre-pandemic. But pinpointing the precise reason or reasons has been elusive. It is playing a role in today’s labor shortage, it puts pressure on wages, and it has helped contribute to inflation.
If you have questions or would like to discuss any other matters, please let me know.
Two for the Road
During the first Volcker recession in 1980, the Fed quickly slashed the fed funds by more than ten percentage points: That rate averaged 18.8% from March 26 to April 20 but fell to only 8.6% by early June. The fed funds rate quickly increased to 19.1% when President Reagan took office in January 1981. Meanwhile, the fed funds rate was reduced from the 19.1% peak to 8.5% by February 1983, the second 10‐point rate cut. - Cato Institute, August 30, 2022
The top 10% of Americans have lost over $8 trillion in stock market wealth this year. The top 1% has lost over $5 trillion and the bottom 50% have lost about $70 billion. - CNBC, September 27, 2022
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