By
Derek Hamilton
July 30, 2024
Employment is one of the key pillars of economic growth. If people have jobs, they have income, and if they have income, they spend. However, recent labor market indicators are sending us mixed signals – some measures of employment growth are still solidly positive (though slowing), while others, like the unemployment rate, have risen.
Trends in the labor market can be measured in many ways, but the most common data comes from the monthly employment report, which produces statistics in employment, unemployment, and wages, among others. While this data is important to watch each month, it can send conflicting signals. The report contains two different measures of employment, and recently, payroll employment (based on information from businesses) has pointed to solid but slowing growth, while household employment (based on surveys of households) has shown a much slower growth path. At the same time, the unemployment rate has steadily moved higher, driven by both job losses and people entering the labor force.
We watch the monthly labor market data closely, but we always look for confirmation from jobless claims, which are a good check on the labor market in general. Jobless claims are simply an aggregation of state unemployment filings. The data are reported weekly and typically track turns in the economy quite well. As you can see from the chart below, jobless claims are near historical lows, which supports the soft-landing narrative. We would need to see the weekly reports move consistently higher to become more concerned about the labor market.
Initial jobless claims
3-month moving average
Sources: Macquarie, Macrobond, US Department of Labor.
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