MNI INTERVIEW: Hot US Job Market Seen As New Normal - LinkUp
MNI speaks to CEO of employment data firm LinkUp about the labor market outlook.
U.S. job growth appears to have slowed in May but the labor market and wages are likely to remain too hot this year for the Federal Reserve, preventing it from lowering borrowing costs, Toby Dayton, head of job market data firm LinkUp, told MNI.
"We're going to see the job numbers coming in a little bit softer than they were in April," he said in an interview, forecasting a below-consensus 125,000 jobs in May. But he expects a pick-up in job growth in June and continued strong wages through the year.
"Labor demand has come down dramatically but it's now bouncing around that balanced job market. We think that job growth it's going to stay pretty consistent in a range of 100,000 to 150,000 monthly jobs, plus or minus 50,000. That's kind of the norm now."
The Federal Reserve isn't likely to cut interest rates this year because "wages are not going down and inflation is going to be sticky," Dayton said, though he'd prefer if policymakers did because the pain in the labor market to bring inflation all the way down to its goal of 2% wouldn't be worth it.
Fed Chair Jerome Powell has cited an "unexpected" deterioration in the labor market as a key factor that might lead officials to cut rates earlier than expected. (See: MNI INTERVIEW: Labor Cracks To Underpin Fed Cuts-Staffing Group)
WAGE INFLATION
Wage inflation of about 4% is also part of the new normal, Dayton said.
"Wage inflation not only has not returned to pre-Covid, it is not going to," he said. "The Fed has to come to grips with that unless they are willing to insist on that 2% target and then keep rates elevated at a higher level than they should at the expense of employment, consumers, workers, all the rest of the economy."
Fed officials have said wage growth remains too firm to be consistent with the central bank's 2% inflation goal. As a key signal that the labor market remains too tight, Fed officials have also emphasized there is still an excess number of job vacancies. U.S. job openings fell to the lowest in three years in April but remain above pre-pandemic highs.
Dayton downplayed the signal in JOLTS data. He pointed to low response rates, duplicate listings, sponsored jobs, and syndication. "The JOLTS data has some of those inflated numbers," he said.
LinkUp, a company that indexes job market data directly from employer websites, shows that job vacancies are closer to balance, he said.
"In our view, labor demand is back to where it was pre-Covid In that full employment environment that we saw from 2015 to pretty much right up until Covid," Dayton said. "Things are in a pretty good, balanced state and it is going to take something pretty material to knock the job market off its current trajectory."