Headline US job strength masks some underlying fragility
The external shocks to the economy have been diminished, thanks to the suspension of the dockworkers strike announced on Thursday night. But Mother Nature and geopolitical tensions are still wreaking damage and casting a cloud over the near-term outlook. The impact of Hurricane Helene will be limited, but the consequences of the Middle East hostilities could be more worrisome and longer lasting.
What you will learn:
- The September employment report drove another nail into recession fears as well as the prospect of another jumbo 50 basis point rate cut by the Federal Reserve. Far from falling off a cliff, the labor market is exhibiting more resilience than expected, removing the primary rationale for a more aggressive move by policy makers.
- That said, the headline strength, depicted by the upside surprise in job growth and drop in the unemployment rate, masks some underlying fragility in labor conditions. Unemployed workers are taking longer to find a job, employed workers saw their hours cut and the lure of switching jobs has weakened, as the pay gap for doing so has vanished. The economy is not heading for a hard landing, but neither is it off to the races.
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