Five crucial questions on the US labor market
Following a swift recovery, the US labor market is entering a crucial phase and the answers to five key questions will have a major bearing on wage growth, inflation, and the health of the recovery.
After steep job losses early in the pandemic, the rebound has been unusually rapid – nearly 19 million jobs, or 84% of the 22 million jobs lost, have been recouped and the unemployment rate is now back below 4%. But labor force participation has been slow to recover, leading to a severe labor shortage that is extending into 2022.
This year, a labor supply rebound should act as a relief valve for excessively high wage pressures. It should also ensure the ‘income baton’ is passed from fiscal stimulus to labor market-driven income growth – a keystone of our consumer and broader economic outlook.
The recovery of the labor market will continue in fits and starts. We expect robust business activity and higher labor force participation will help close the 3.6 million jobs shortfall in H2 2022. We also anticipate the unemployment rate falling toward 3.5% by year-end and the participation rate rebounding to 62.5%.
Given the murky path of the pandemic and the fact that some labor force decisions made during the pandemic could take longer to unwind, a slower rebound in labor force participation is a key risk. Not only could this affect the labor market; it would also impact inflation and the broader economic outlook.
Read the report for full answers to the five crucial questions on the US labor market:
- What impact will Omicron have on the labor market?
- How tight is the labor market?
- Will labor force participation rebound?
- Will wage growth stay hot?
- How close are we to ‘full employment’?
Tags:
Related Research
Post
Why the real yield on private wealth will keep falling globally
Despite the importance of returns on private wealth for long-term investors – be they households, asset managers, or pension funds – the fact that real yields have been on a downward trend across the world for decades seems to have escaped attention.
Find Out More
Post
Growth outlook determines the fate of fiscal consolidation in APAC
We expect fiscal consolidation to generally continue in Asia, except in mainland China and Taiwan. In those economies, we anticipate looser fiscal policy this year and very slow normalisation next year.
Find Out More
Post
Opposition win would secure much-needed EU funding
The Polish parliamentary elections, scheduled for October 15, are likely to be deeply consequential for domestic policy and relations with the EU.
Find Out More