Powell’s Favorite Jobs Chart Won’t Update Friday: Morning Brief
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Friday, August 5, 2022
Today’s newsletter is from Myles Abroad, senior markets editor at Yahoo Finance. Follow him on Twitter @MylesUdland and on LinkedIn.
The July jobs report is expected to show another month of steady, but slowing, hiring in the US economy.
But the Federal Reserve’s favorite labor market health measure won’t be updated when the BLS releases its latest monthly report on Friday morning.
Earlier this week, we learned that job openings were moving in the Fed’s preferred direction – which is lower.
In June, some 10.7 million jobs were open in the United States, compared to 11.3 million the previous month and 11.9 million in March, which marked a record.
Over the past few months, Fed Chairman Jay Powell has spoken at length about the number of open jobs and variously stated that there are simply too many vacancies in the US labor market.
As early as March this year, Powell said high job vacancies indicated a labor market “tight at an unhealthy level”.
“If you just reduced the number of job postings to make it more like one-to-one,” Powell said, “you’d have less upward pressure on wages. You’d have a lot less labor shortage. labor, which goes into the whole economy.”
Speaking to reporters in late July, Powell said: “There’s a feeling that the labor market is coming back to equilibrium. If you look at vacancies or resignations, you see them moving sideways or maybe a bit down. But it’s only the beginning of an adjustment.”
And whether this “adjustment” will actually lower job vacancies without increasing unemployment is also hotly debated within the business community.
Fed economists Andrew Figura and Chris Waller argued last month that the number of open jobs could be reduced without pushing up unemployment.
Economists Olivier Blanchard, Alex Domash and Larry Summers wrote in response that this analysis “contains misleading conclusions, errors and factual errors”, arguing that “vacancies are very unlikely to normalize without a major increase in the unemployment”.
In June, the last month for which data on unemployment and job vacancies are available, the jobless rate was 3.6%. Wall Street expects the unemployment rate to remain stable in July.
Since Powell’s comments in March, of course, things have started to change noticeably on the labor front.
In the tech sector, job cuts have become an unfortunate reality for many companies that have performed very well during the pandemic, with Robinhood’s (HOOD) announcement this week being the latest example. Meanwhile, weekly unemployment insurance filings – the best real-time indicator of the labor market – rose again last week and are near 8-month highs.
“The job market is not immune to the slowdown in spending and investment already underway,” wrote Sarah House, an economist at Wells Fargo, in a note released Thursday. “Cracks started to appear.”
Economists expect the U.S. economy to have added 250,000 jobs in July, data that would be consistent with a “growing but slowing” view of the economy seen in data from all sectors.
And according to Powell, slowing growth isn’t just a table stake, it’s the Fed’s desired outcome.
“We think it’s necessary to slow growth,” Powell said last week. “We actually think we need a period of growth below potential, to create some looseness so that supply can catch up. We also think there will in all likelihood be a some easing of labor market conditions. And those are things that we are planning…to bring inflation back to the 2% path.”
What to watch today
8:30 a.m. ET: Change in non-farm payrollJuly (250,000 expected, 372,000 in previous month)
8:30 a.m. ET: Modification of the private payrollJuly (230,000 expected, 381,000 in previous month)
8:30 a.m. ET: Change in manufacturing payrollJuly (20,000 expected, 29,000 in previous month)
8:30 a.m. ET: Unemployment rateJuly (3.6% expected, 3.6% in previous month)
8:30 a.m. ET: Average hourly earningsmonth-over-month, July (0.3% expected, 0.3% in prior month)
8:30 a.m. ET: Average hourly earningsYoY, July (4.9% expected, 5.1% prior month)
8:30 a.m. ET: Average weekly hours All employeesJuly (34.5 expected, 34.5 in previous month)
8:30 a.m. ET: Labor force participation rateJuly (62.2% expected, 62.2% in previous month)
8:30 a.m. ET: Underemployment rateJuly (6.7% of previous month)
3:00 p.m. ET: Consumer creditJune ($25 billion expected, $22.347 billion in prior month)
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