US Labor Market Lags Behind the Economy

While the U.S. economy shrinks for the second consecutive quarter, labor market remains tight and companies are still focused on hiring. In July the US unemployment went down to a historically low 3.5 per cent even after gross domestic product declined 1.6% and 0.9% in Q1 and Q2 2022, respectively.

• The US Bureau of Labor Statistics (BLS) data on job openings and labour turnover shows that layoffs still running at historically low levels in most industries. Most layoffs in June were concentrated in construction, which is sensitive to rising interest rates.
• The number of open job positions remains well above early 2020 levels and quits rate remains well above pre-coronavirus pandemic levels in most sectors, which indicates that the labor market remains strong. However the decline in a quits rates in recent months indicates the slowdown in the pace of employees leaving for better offers elsewhere.
• As labor market usually lags behind the economy it make take up to two or three months before the increase in the unemployment rate will confirm the decline in output.