Jobless claims fell further last week, to 203,000, marking not only the lowest level in the current cycle, but also the lowest point in nearly fifty years. The 4-week moving average also dipped to 209,500 – also the lowest since 1969. Both results were better than expected.
Also released this morning, the ADP Employment report indicated that private sector employers added 163,000 jobs in August, falling short of economist estimates for about 200,000.
Both reports give some indication of the strength of the labor economy, and provide some additional insight into the key government report on unemployment tomorrow.
Taken together, the story is still a very good one for workers, speaking to the tightness of the labor economy.
Job openings are plentiful, and the competition for skilled workers is intensifying. Employers are remiss to trim their respective workforces, particularly in an environment in which attracting and retaining workers is tougher. That bodes well for consumer confidence, wage growth, and consumer spending – all of which should continue to support overall economic growth.
Taken together, there is a cautionary note that shouldn’t be overlooked. Job creation has been a bright spot for the economy for many years, but it will become increasingly difficult to maintain that robust pace as the pool of skilled labor dries up and hiring becomes more difficult.
At some point, job creation is likely to slow, which will require employers to find other ways to boost productivity, which improved by 2.9% in the second quarter – the strongest pace in three years. When a sustained slowdown in job creation will become apparent remains to be seen. It’s possible that it could continue for some time, fueled by individuals re-entering the workforce after remaining voluntarily on the sidelines for some time.
For now, the story remains very good for workers. It’s a “seller’s market” for labor, which should continue to provide a solid degree of job stability for workers and stronger wage growth ahead.
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