United States: Will the job market experience a slowdown?

The official employment figures in the United States will be released on Friday at 08:30 (12:30 GMT). The unemployment rate is expected at 3.5%, the same as in July, when it first returned to its pre-pandemic level, which was the lowest in 50 years. But job creations, on the other hand, could have slowed sharply, falling to 300,000. It would be almost half as much as in July.

The jobs created in August in the private sector alone were disappointing: 315,000 creations were expected, but there were only 132,000, according to the monthly ADP/Stanford Lab survey, published on Wednesday. “We believe these numbers suggest a transition to a more moderate pace of hiring,” Nela Richardson, chief economist for ADP, said in a conference call. She said that “companies of all sizes are trying to understand the complex economic situation”, linked to “high inflation” and the lack of workers at a time when employers are looking to hire on a large scale.

Neither the economic slowdown, nor fears of recession, nor even the measures taken by the American central bank (Fed) to curb demand and thus curb inflation, have so far got the better of the iron health of the the job market. The labor market had shown unexpected dynamism in July, even returning to its pre-pandemic level. With more than half a million new hires, the unemployment rate fell to 3.5%, as in February 2020, and the 22 million jobs that had been destroyed due to Covid-19 have now been recreated . At the end of July, there were more than 11 million vacancies, or two for every job seeker. More than 4 million resignations were recorded over the month, as in June.

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The fight against inflation requires a slowdown in employment

And weekly jobless claims, which give an indication of the level of layoffs, fell almost every week in August. They are at historically low levels. “Labour market conditions remain tight despite fairly weak economic growth,” said Nancy Vanden Houten, chief economist for Oxford Economics, in a note released Thursday.

The gross domestic product (GDP) of the United States contracted in the first two quarters of 2022, which corresponds to the classic definition of a recession. And if the first economy in the world does not seem to fit into this box this time, it is in particular because of the iron health of its labor market. The fight against high inflation, however, will go through a slowdown in employment, and even probably through a rise in the unemployment rate. Jerome Powell, the head of the Fed, hammered home this last week at the Jackson Hole conference: returning to price stability will lead to “a long period of weaker growth” as well as “a slowdown in the labor market”. . Especially since companies have been facing a labor shortage for more than a year, and, to recruit, are offering wage increases, which is helping to drive up prices.

The Fed, maneuvering in the face of inflation, is gradually raising its key rates, in order to make credit more expensive for individuals and businesses, and thus slow down consumption, and therefore the pressure on prices. It will raise rates again at its next meeting on September 20 and 21, and to determine the extent, will look very closely at these employment figures. A slowdown in the labor market, indeed, could show that its actions are beginning to bear fruit, when the opposite could lead it to want to act forcefully. Inflation, at its highest for 40 years, however slowed in July, to 8.5% over one year, according to the CPI index.

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