CHART OF THE WEEK
The jump in the unemployment rate from 3.8% to 4.0% in June is down to the month’s 0.2% rise in the labour force participation rate. At 62.9%, it is nearing the 63.0% ceiling that has been in place for the past five years. Given the ageing population, it is unlikely that it will rise further.
New job creations remain close to 200,000 per month, a pace that should continue to lower the unemployment rate significantly. Ample anecdotal evidence supports the extremely tight labour market hypothesis, including a shortage in truck drivers and a rise in the number of ex-offenders being hired. However, for the moment there has been no marked acceleration in wages.
As the graph below shows, companies have never made fewer workers redundant than currently, yet employees are resigning faster than at any time since 2001.
OUR ANALYSIS
While the resignation rate had been stable below 2.2%, a level that prevailed between 2005 and 2007, it has risen sharply in the last three months, indicating that an increasing number of employed are leaving their jobs.
Atlanta Fed data, which is calculated from detailed source data, shows the year-on-year rise in median hourly wages for job switchers was 4.0% whilst that for job holders was 2.7%. Direct substitution effects aside, the rise in the number of resignations is likely to put relatively more pressure on wages than the falling unemployment rate alone.
The opinion expressed above is dated 13 July 2018 and is liable to change.
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