US Economy, unemployment: 7 days of Economics

In August, the US economy created 151,000 jobs, a touch below the average performance of the previous three months (190,000).

As this is more or less the figure thatallows stabilising the unemployment rate,while the labour participation ratio wasunchanged (62.8%), the rate ofunemployment remained below 5% (4.9%).This highlights a strong labour market. Still, whether the US is in full-employment or not remains an open question. Since last October, the unemployment rate fluctuates within the estimation range of the NAIRU (Non-Accelerating Inflation Rate of Unemployment, estimated between 4.6%and 5% by FOMC members). However,wages are still not on a sustained upwardstrend. For the core of US workers (non supervisory production employees of the private sector) average hourly earnings were up by 2.5% y/y in August, a stable rate since last December. This lacks of wage inflation is puzzling with such a low rate of unemployment rate. However, if instead ofthe U3-measure of unemployment, a broader measure is considered, the flatlining of wage growth makes perfect sense (see chart). The U6-measure (which adds marginally attached workers and those employed part-time for economic reasons to unemployed) remains almost two points above its pre-crisis low, meaning that there still is a large pool of available workers, which caps the increase in earnings.

Alexandra Estiot

US Labour Market

Keep in touch and receive our newsletter!

Select your topics of interest and frequency of delivery.