Unemployment Report

Unemployment Report

The U.S. unemployment comes out on Friday, July 8. Right now, we're in an interesting time where it's unclear what counts as "good." The U.S.--like most of the world--faces high inflation, and the Federal Reserve is mandated to control it. Their only influence is on economic growth. To slow inflation, they seek to slow the economy. Ideally, they manage to do so enough to arrest inflation but without triggering significant economic contraction aka a recession.

So where does that leave us on the employment report? Right now, the labor market is historically tight, with millions more job openings than unemployed workers. Relaxing that tightness would likely help with inflation. That means that things that are normally good, such as a decrease in the unemployment rate, are not so good any more. Adding a lot of jobs is ambiguous--on one hand, it shows strong demand for workers, something we might prefer to see relax. On the other, it shows companies successfully found workers, a sign that they're not against a firm barrier--a good thing. Better news would be an increase in labor force participation, more people feeling comfortable and seeing sufficiently appealing opportunities to return to work.

These are difficult economic times. If we want the Fed to achieve its goal of slowing the economy to stop inflation, what counts as "good" in normal times now potentially counts as "bad." In the July 8 report, ideal findings might look like a tenth of a percent increase in unemployment, two tenths percent increase in labor force participation, and a few hundred thousand jobs added. We'll see when it comes out!

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