The job market has become the Schrödinger’s cat of the American economy.
The job market is alive and thriving, adding hundreds of thousands of jobs each month this year, while also vulnerable and dying.
Well, which is it?
Clearly, job seekers are pretty satisfied with their choices. Investors will get a look for themselves when the August jobs report is released on Friday in the week ahead.
How can investors try to sift emotion from evidence? One clue about the confidence in the job market is to check how long people who want to work are going between gigs. They aren't on the sidelines of the job market for long.
A year ago, about one in four unemployed people spent less than five weeks without work. In July, more than one in three were finding work in five weeks or less. A year ago, if you lost a job you would expect to go without work for about three months on average. Last month that had fallen to two months, according to the Bureau of Labor Statistics.
“Shorter episodes of joblessness defy economists’ concerns … that workers would suffer from long-term spells of unemployment,” wrote the Wall Street Journal in late August. The pandemic’s impact continues to befuddle common economic expectations. An average of 418,000 jobs have been created each month this year even as the Federal Reserve has raised interest rates, inflation has hit generational highs and the stock market fell into a bear market.
Watch to see if the proportion of out-of-work Americans finding jobs fast continues growing. It’s a sign of continued confidence in the sustained strength of the job market. And it’s just one of the many important data points in the jobs report the Federal Reserve will use to bolster its confidence that the economy can withstand higher interest rates as the agency battles inflation and struggles to regain the confidence of investors.
