Jobs, jobs, jobs
- Hiring up
- Layoffs stable
- Wage growth divergence
Narrator: It's job's week. What's ahead for the labor market?
We've gone through this massive energy shock so far this year. But when we think about how companies have responded to this in terms of hiring activity, things have actually picked up.
Animation: Chart shows month-over-month three-month average net change in nonfarm payrolls.
Narrator: So if you look back to right when the war started, the three-month average for nonfarm payroll gains was right at -4,000. Pretty weak. If we look at the trend since then, things have improved, I would say pretty drastically in the sense that we now are averaging 71,000 jobs over the past three months. And that might strengthen this week if we do get a pretty solid jobs report, plus if you get some solid revisions for the prior months.
Now, I think the thing to keep in mind is that in this post- pandemic cycle, we have emphasized a lot that investors should focus a lot more on the layoff data, not necessarily the net hiring data.
Animation: chart shows U.S. initial jobless claims since 2015. Chart shows relative stability prior to and after the pandemic with a massive uptick from January 2020 to March 2021 before settling back in the 200 range to present.
Narrator: A lot of that has to do with the fact that we have these supply constraints with aging demographics, but also slower immigration. So it's been more beneficial to look at how much companies are laying off individuals if that is the case, rather than just looking at outright hiring activity.
However, now that we're starting to see things like wage growth turn, then we have to start paying attention to what that could mean for a reacceleration in the labor market.
Animation: Chart shows Atlanta Fed wage growth tracker and U.S. average hourly earnings trending toward each other, both in a downward direction, until June 2026 when the Fed wage growth tracker began to trend upward again while the U.S. average hourly earnings continued to trend downward.
Narrator: That ultimately might make the Fed's job a lot harder in trying to combat inflation, but at the same time, it is consistent with an economy that continues to grow.