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Saved By The Beveridge Curve (This Time Is Different)
This time is different.
No, seriously. It is. The question is whether it'll stay different.
The much-maligned "soft landing" crowd (descendants of the "transitory" cult, most of whom went extinct more than a year ago) have been right about one thing: The trajectory of job openings supports the notion that the US labor market, and thereby wage growth, can normalize without a big jump in the unemployment rate.
If you assume labor market balance and more moderate wage growth are the keys to serv
Quick thoughts
– Pre-Covid labor force 165MM
– Covid erased around 20-30MM jobs, but that all came back.
– Covid erased around 6MM from labor force, permanently or semi-so. Early retire 3MM, Covid death working age 0.3MM, Covid disability 2MM??, lifestyle change, migration barriers.
– Job opening percent (JO) and ratio of job opening to unemployed (JO/UE) went to levels never seen before. JO 8%, JO/UE 8.0/3.5 = 2.30.
– At “unprecedented” high JO, the Beveridge curve is vertical. Makes sense, because UE has a lower bound, it can’t be zero or even 1% (even during WW2, UE was 1.3%). People between jobs, not seriously looking, looking but unemployable. So UE is insensitive to JO and JO/UE goes straight up.
– When JO/UE gets down to “precedented” levels – e.g pre-Covid we saw 5.0/4:0 = 1.25 and 4.5/3.5 = 1.30 – maybe the prior relationships (the curve) can work again. After another 1-2 ppt decline in JO, we’ll get to find out.
Interesting numbers (and comments in general, so thanks) but that 3MM early retirees and 2MM long COVID ‘disabled’ feel very much like people who might decide to re-join the workforce depending on their financial situation.
With higher rates affecting (negatively) the value of all assets and government largesse a thing of the past, plus inflation – it seems a fair few ought to re-join the workforce…
I read, not that I’d know mind you, that retired persons have different spending patterns than working persons, and may be affected differently (less?) by inflation.
Any comments by those retired persons among us?
Don’t look now, but if employment and inflation continue to ratchet down–and particularly if core inflation were to begin to budge–Powell and the Fed may pull-off the best landing since Ted Striker in the movie “Airplane.” Of course, the debt ceiling and/or Vladimir Putin (or any other number of things) could easily upend that. Dare we hope?
…there’s a big line at the airport waiting to pull the light plug out…
My daughter and her husband both got laid off from their nice six-figure tech jobs, one in Jan, one in May. A couple of days ago my daughter said they have done a bit of adjusting and determined that one of them will need a job by the end of Oct, but they won’t need to touch their savings. They are just messing with their severance benefits and enjoying their child. I suspect they are not alone.