27four Investment Managers
12th October 2021
“Search frictions” behind the recent poor job numbers
Recently released data from the US Labour Department showed that the U.S. economy added 194,000 jobs during September far lower than consensus expectations for 340,000 new nonfarm payrolls. This followed another big miss in August where only 235,000 jobs were created against an expectation of 720,000.
While the sharp slowdown in US job growth is concerning, we do not think it is going to alter the Fed’s tapering timeline as being suggested by some analysts. The issue here seems not to be on the hiring side but rather the supply side of labour. As shown on our chart of the week below, Job openings continue to outstrip hiring numbers which indicates that the economy is creating enough jobs. However, it is taking longer to fill those jobs hence the disappointing hiring prints. It may be that the available workers do not have the skills required for the available jobs. Or, perhaps, some unemployed workers are choosing not to work until their benefits run out. But whatever the case may be, the slump in job growth is not a signal of weakness in the economy, so the Fed is unlikely to hold off its tapering on account of these prints. In fact, we think the Fed will be more worried about rising wage inflation because of these search frictions.