UNDERSTANDING THE US LABOR MARKET!

hello welcome to an educational webinar on the U.S labor market by the lab and this is presented by Capital hungry market research group the labor market the U.S labor market is a vital component of the overall economy and it is closely intertwined with monetary policy today we will explore that that the dynamic relationship between the U.S labor market and monetary policy emphasizing the key labor market indicators closely monitored by the Federal Reserve monetary policy and the labor market objectives the federal reserve's primary objectives are to maintain price stability and Achieve maximum employment monetary policy implemented by the FED plays a significant role in influencing various aspects of the labor market by adjusting interest rates and managing economic conditions the FED seeks to promote sustainable growth and a healthy labor market that will allow a disinflationary process in inflationary times how tightening works in the labor market first of all the FED Titans and rates go up this leads to higher borrowing costs where since the Federal Reserve increases interest rates it makes borrowing more expensive for businesses and individuals next is slower business investment with higher borrowing costs businesses become more cautious and may reduce their investment plans this can lead to slower job creation and reduce demand for labor reduce job growth slower businesses so slower business Investments translate into fewer job opportunities being created in the economy companies may become more hesitant to hire employees or expand their workforces especially when there is damp and demand in the economy with reduced demand for labor employers May employers have less pressure to offer higher wages wage growth May moderate or even decline as businesses seek to control costs in a tighter monetary policy environment and this leads to a higher unemployment rate as job growth slows down the unemployment rate may begin to rise the number of unemployed individuals seeking employment May outnumber the available job openings resulting in a higher unemployment rate last to feel the heat the labor market is the last part of the economy to feel the effects of the rate hikes because of the following long-term contracts between employers and employees slower adjustments in hiring and firing decisions time lags and economic responses sticky wages and the complexity of the labor market dynamics on the left we have a chart of initial jobless claims and we can see that since the start of the rate hike cycle it wasn't until September and start of 2023 where we started seeing jobless claims go up right so almost almost like eight months 10 months into the year before we saw increases in jobless claims tight labor market a tight labor market refers to a situation in which there is a low level of unemployment and a high demand for labor key characteristics and implications include low unemployment rate increased wage pressures elevated job openings continuous job quits low initial jobless claims and strong numbers strong job creation numbers meanwhile a loose labor market refers to a situation in which there is a high level of unemployment and a surplus of available workers relative to the number of job openings in a loose labor market there is a lack of competition among employers for qualified workers which can result in downward pressure on wages and limited bargaining power for job Seekers key characteristics and implications include high unemployment rate low wage pressures reduced consumer spending High initial jobless claims and surplus of workers labor market indicators the FED carefully monitors several essential labor market indicators to assess its strength and inform policy decisions these indicators offer valuable insight into employment trends wage Dynamics and overall labor market condition such indicators include non-farm payroll unemployment rate initial jobless claims ADP employment change PMI employment index wage growth and Joel's job openings and job quits the icy hot economy so the icy hot economy refers to two different parts of the economy some with that are cold and this part includes things like retail manufacturing Commodities Trucking Goods these were the first areas of the economy that felt the heat from the rate hikes the hard part of the economy is where there is still lots of consumer spending lots of business activity happening and it remains sticky and hot such as Services Leisure food labor construction and housing hot to cold to get stubborn inflation back down to two percent the hot parts of the economy must make their way to the cold the lagging rate hike effects will help that initiative but it will also dig the dagger deeper for the sectors already in the cold category so going back to this slide in order to get services that been Services Leisure food labor construction the lag effects from the rate hikes which are experience like 18 months or 24 months is when we fully experience them this will subdue but it will also damage these sectors that are already more cold recent developments in the labor market ADP employment chain ADP showed strong growth in the private sector specifically in Services sector as this part of the economy remains hot the services sector added 373 000 jobs led by Leisure and Hospitality at 232 000. Education Health Services were 74 000 other services at 28 000 at construction at 97 000 jobs created in June Services PMI employment index the ism services employment index in the United States increased to 53.1 points in June from 49.2 points in May of 2023 an increased back into expansionary territory as consumers remain spending on services looking at PMI employment indexes can be a great look into other labor market data to see if we are in specially in services or manufacturing if we're going to see an increase in employment or a decrease right and this basically forecasted the change in services part of the ADP employment report job openings job openings need to see continuous decreases to show a softer labor market when job openings are high workers have greater options available to them in the job market we have seen joules come back below 10 million in Q Q2 but has remained within the 9.5 to 10 million range indicating a still tight labor market job quits recent job quits Joel's job quits showed that job quits over overcame the decreases since February and is now back above 4 million higher or increasing job quits indicates that workers are confident that they can get a better paying job in the market which also forecasts Strong high worker confidence and a still tight labor market jobless claims jobless claims show increases showed increase to above 260k in the past few weeks but since then has come back into the range of 230 to 240k if we don't see Rising claims it increases the probabilities of a second rate hike after July's hike to prac claims higher and we can see we've ranged in there week over week uh pushed up above 360 but have fallen back down into this muted area wage Road average hourly earnings surpassed expectations and increased in year over year and month over month readings of June by 4.4 and 0.4 respectively increase in wages is a symptom of inflation wages increase with inflationary conditions so consumers can keep up with the price pressures increasing wages can also impact inflation due to increase in consumer spending power resulting in lingering aggregate demand and here we can see compared to pre-pandemic hourly wages are still trending higher unemployment rate June's unemployment rate dropped down to 3.6 percent from 3.7 percent the number of unemployed people decreased by 140 000 to 5.96 million and the unemployment rate is still at historical lows indicating a still tight labor market so you can see we're still at historical lows non-farm payrolls the June NFP showed 209k jobs created but it was the first Miss on expectations in 15 months the payrolls give a sense of weakening but the labor market Still Remains robust but the labor market remains hot they said in recessions of 1974 and 1980s the non-farm payroll changes month over month being a lagging indicator we're showing strong positive numbers before the real impact of the economic contraction and recession hit the labor market historically there has been very strong job numbers on the economy job numbers as the economy enters a period of recession you can see 74 before we enter the late recession 75 over here as well in 1980s early 1980s and then 1982 we saw a decreasing in job job creation so what's next in summary the labor market is showing signs of weakening but remains robust with historical low uh historically low unemployment rate wage growth low initial jobless claims Joel's job quits going up and Joel's job openings still remaining in the range of 9.5 to 10 million while the effects of the rate hikes on the labor market may not be immediate they eventually influence job growth wages and overall employment levels higher borrowing costs and a more cautious business environment can slow down job creation and moderate wage growth however the timing and magnitude of these effects can vary depending on economic conditions and other factors at Play as a Federal Reserve navigates its rate hike cycle it aims to strike a balance between maintaining price stability and achieving maximum employment currently the sentiment remains that the FED may be able to nail the soft Landing as we have seen disinflation while the labor market remains robust and tight as we head into the second half of 2023 the lag effects will continue and it will be important to see how the labor market is impacted around the 20 around the 18th to 24 month Mark since the start of the rate hike cycle thanks everybody for watching this short webinar on the U.S labor market and its implications with monetary policy enjoy

Channel: Capital Hungry

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Id: 0VSxRBT2QfU

Length: 12min 6sec (726 seconds)

Published: Sat Jul 15 2023