The US labor market in three charts

Three charts can characterized the US labor market.
The first graph shows that probably since April of this year the momentum of the market has changed. We see on the chart that from April the level of new jobs is systematically higher than the average of the previous three years. That was not the case during the first quarter. The scale has changed but this latter is consistent with other information such as ISM or PMI surveys. In other words, on companies’ side there is a recent but clear improvement in the outlook.
usa-en-2014-june-employmentThe second graph compares the current job recovery to previous episodes on the US labor market. The current level of employment is still well below the level seen in the past. In other words, the current level of employment is just back to the peak seen before the crisis. During this period, even with a lower participation rate, the labor force has increased. From January 2008 to June 2014 the labor force has increased by 1.6 million. These people do not have jobs. There are still numbers of disequilibrium on the US labor market. and there is no short term solution for that.
Long term unemployment has increased a lot and will remain high for a long time: 3 months of high jobs creation are not sufficient to reduce it. The current dynamics will have to continue to reduce all the different disequilibria.
The employment issue will remain important in the foreseeable future.
usa-en-2014-june-employ-compThe third chart shows that wage increase for all employees of the private sector is not currently a trigger for higher inflation. That’s important.
USA-en-2014-June-wagesThe current momentum on the labor market is strong, stronger than what was seen in the previous two or three years. But this past low momentum has implied important disequilibria but no seeds for a spike in inflation. This must comfort the Fed to keep its accommodative monetary policy for still a long time period in order to fight these disequilibria.

2 thoughts on “The US labor market in three charts

  1. Pingback: Janet Yellen at the Congress on July the 15th | Philippe Waechter's blog

  2. Pingback: USA – The risk of rising inflation is limited | Philippe Waechter's blog

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