The Red-Hot US Labor Market Is Suddenly Not
We’re starting to see hints of a softening that will be crucial to the Fed’s plan for avoiding a recession.
Back to the job fair.
Photographer: Brett Carlsen/Getty Images
The Federal Reserve looks like it’s finally getting what it really needs in its fight to tame inflation: a cooling in the red-hot labor market. Although recent data suggest a firming in the economy, with consumer confidence, manufacturing and personal spending all exceeding forecasts, buried deep in those reports is more compelling information about the Fed’s ability to get inflation back under control without forcing the economy into a recession.
First, the Conference Board said Tuesday that its monthly consumer confidence index for May was 106.4, which was higher than all but one of the 54 economist forecasts gathered by Bloomberg. Nevertheless, the portion of the index measuring the difference between those saying jobs are plentiful versus those saying jobs are hard to get capped its biggest two-month slide since the depths of the financial crisis in early 2009 excluding the pandemic era. The decline of 7.8 points over the course of April and May “is fairly notable and is usually consistent with a recession,” Tom Porcelli, chief US economist for RBC Capital Markets, wrote in a research note Tuesday.