Half-year balance on the US labor market: Employment continues to gather pace at subdued wage momentum

In June, the number of employed persons in the United States increased by an impressive 222,000, as revealed in the latest official Labor Market Report. What is more, the payroll increases initially reported for the two preceding months have also been revised up. This means that an employment increase has been reported for the first half-year of somewhat more than one million persons, an expansion rate that is more or less on a par with that of the same period of the previous year. The US job motor is therefore continuing to tick over quite nicely, and this also does not appear to suggest a change in the direction of the Federal Reserve’s monetary policy. Furthermore, the marginal rise in the unemployment rate in June from 4.3 to 4.4 percent is attributable to the continuing influx of „discouraged workers“ and should not be taken as a warning signal. Until now, this influx to the labor supply has also prevented an acceleration of the wage momentum which might otherwise be expected for a historically low unemployment rate. Due above all to the extremely low unemployment level, particularly among the well-qualified workforce, wages can still be expected to gather pace somewhat in the second half-year.

Even if the number of discouraged workers has already visibly contracted in response to the ongoing recovery on the US labor market, the statistic under the heading „marginally attached to the labor force“ still documents a group of nearly 1.6 million such persons. These persons, marginally attached to the labor supply but not actively searching for work, have either lengthened their education or are temporarily involved in family obligations. A further factor decelerating the wage momentum is the „part-time buffer“ which currently still consists of 5.3 million employees working involuntarily in part-time jobs. These two indicators already lie below their long-standing averages and also signal a slight increase in the wage momentum in the months ahead. The more these two reserve groups – that currently still help to satisfy the demand for labor – dwindle away, the greater the danger of an abrupt surge in wages.

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