Labor Market Update

Understanding Labor Market Trends

The Bureau of Labor Statistics will release the Employment Situation at 8:30 a.m. The world will watch and analyze what is happening in the U.S. labor market.

Today, I wanted to highlight some labor market trends everyone should know. The discussion topics are from this week’s lecture on unemployment in my Principles of Macroeconomics course.

Disclaimer: This post was written Thursday night before the August Employment Situation Report is released on Friday morning. It would be interesting to see how this data changes when today’s report is made available. Here is the release.

Update: The August unemployment rate is 4.2%, and 142,000 new jobs were created.

Unemployment

The current unemployment rate is 4.3%, and it has been increasing over the past couple of months. According to Marketwatch's forecast, the market expects it to remain at 4.3% or even decline to 4.2%. Personally, I expect it to increase. If it does, this would be another signal to the Federal Reserve that an interest rate adjustment is warranted.

Labor Force Participation

The historical trend is that men’s Labor Force Participation has been declining while women’s is increasing. There was a structural shift in LFPR for both men and women during the COVID-19 recession. Business owners will tell you that hiring is harder than ever and is a big challenge to their operations.

Race, Ethnicity and Unemployment

The racial and ethnic unemployment gap has been narrowing since the 2010’s. However, Black and Hispanic unemployment rates are usually twice as high as white unemployment rates. This is an area that we need to invest in and improve.

The Value of Education

Education pays! In addition to higher lifetime earnings, higher education levels are associated with lower unemployment rates. In this graph, I restrict the data to the 25-34 age group only. I am interested in the impact of education on early-career individuals.

Job Openings

According to the latest JOLTS report, there are currently 7.6 million open jobs in the U.S., roughly 1.1 jobs per unemployed individual. Thus, there are more jobs available than unemployed individuals. However, matching the right employee to a job is a difficult process.

Number of Jobs

In July, the economy added 114,000 new jobs. Overall, this is strong growth, but compared to recent history—post-COVID—it is slower than we are used to. It will be interesting to see what Friday’s number is.

Nominal Wage Growth

In July, year-on-year wage growth was about 3.6%. The growth rate is in nominal terms. In real terms, average real wages grew at 0.7% annually in July. The graphs below show nominal and real wage growth.

I am excited to see what data the August Employment Situation provides. Leave a comment and share any insights you gained from this post. If you have read the BLS report already, what caught your attention?

Best,

Dr. A