Tag: Jobs

Inflation and jobs

Posted on by Paul Gomme

We are finally seeing jobs numbers for October and November. The Bureau of Labor Statistics press release studiously failed to mention the loss of 105 thousand jobs in October — except to mention the 162 thousand fall in federal government employment. Perhaps this omission is a leftover from Trump having fired the previous head of the BLS after the BLS revised the May and June employment numbers down. With September employment revised down to 108 thousand (from 119 thousand), there was a scant 3,000 increase in employment over September and October. November delivered an anemic 64 thousand job gain.

As noted in the BLS press release, due to the Federal government shut down, the household survey for October was not collected. In the figures using household survey data, we have allocated half of the change from September to November to each of October and November (and omit the October figure to emphasize that this data is unavailable).

The unemployment rate is similarly missing for October 2025. The November unemployment rate rose to 4.56%, up from 4.44% in September. This is the highest unemployment rate in four years.

Overall, the employment numbers are fairly weak. Although average weekly hours rose from 34.2 to 34.3, so that total hours of work in the US rose. Moreover, firms continue to be opening jobs at a relatively high rate even though the hiring rate has been falling.

Inflation

There were two price index reports released, the September PCE and the November CPI. The September monthly (annualized) PCE rose slightly, from 3.14% to 3.27%. Our preferred trend measure rose from 2.70% to 2.89%. The Fed’s inflation measure of choice, the core PCE (PCEX) fell from 2.68% to 2.40% and our trend measure also fell, from 2.82% to 2.68%. While core PCE inflation is moving in the right direction, it is still above the FOMC’s 2% target.

Due to the federal government shutdown, October data for the Consumer Price Index was not collected. Below, the November CPI inflation rate is the average for the two months from September to November. The monthly annualized CPI rate for October November averaged 1.23%, down from 3.79% in September and our trend measure fell to 2.19% (October-November) from 3.38% in September. In the graphs below we have included the November number with dots. Annualized core CPI inflation was 0.92% in October-November while the trend measure was 1.94%.

Certainly good news on the inflation front: the last reading on the Fed’s preferred core PCE inflation measure moved down (albeit still above target) and the more timely CPI measures have continued downward, a trend that hopefully will soon be reflected in the PCE inflation measures. As inflation approaches target, the inflation hawks on the FOMC will have less reason to insist on keeping interest rates high. At the same time, the slow hiring in the labor market should allow some to argue more strongly for more rate cuts.

July Employment Report

Posted on by peter.c.rupert

By Paul Gomme and Peter Rupert

The BLS announced that employment rose by a very subdued 114,000 according to the establishment survey, 97,000 of which came from the private sector. The bulk of the increase came from Health Care and Social Assistance sector, increasing 64,000. Moreover, there were 29,000 fewer employees over the past two months than reported earlier, as May was revised down 2,000 and June revised down 27,000.

Average hours of work fell from 34.3 to 34.2. Given the weak increase in private sector employment and the decline in average hours meant that total hours of work fell about 2.6%.

To be sure, the July employment report is disappointing. The figure below plots the change in nonfarm payroll employment since 1947. To this figure, we’ve added a red dot when the change in employment was at most 114,000 (as in the most recent jobs report), and the economy was in an expansion. (We’ve excluded a few months around the start of the pandemic because these employment changes were so extreme.) The bottom line is that the US has often had weak job reports in the midst of expansions. The point being that looking only at one monthly report may be very misleading. Indeed the Fed has mentioned this in other contexts:

The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.

July 31 FOMC Statement

The unemployment rate, based on the household survey, rose to 4.25% from 4.05% in the previous month. Digging deeper into the unemployment data reveals that much of the increase in the unemployment rate in 2024 has been due to a combination of workers losing jobs, and workers reentering the labor market, the labor force grew by 420,000. Keep in mind that reentry may be an artifact of the rules for counting an individual as unemployed which includes a notion of active job search. According to the jobs report, in July there were 4.6 million individuals who were not in the labor force but who want a job, an increase of 346,000. When these marginally attached individuals are included in the ranks of the unemployed, the unemployment rate is nearly 8%, not the official 4.3%.

Once again there are many in the media showing the possibility that the economy is heading toward a recession. Note: definitionally, it has to be true that if we are currently not in a recession we are heading toward one since recessions do frequently occur (but have become much less frequent, see the recessions graph below. At any one time there are usually both positive and negative signs. For example, how much weight should one put on a one month decline? Or a one day decline in the stock market? Jeremy Piger uses data to infer the probability the economy is in a recession, as of July 26, the probability that we were in a recession in June was 0.26%. That said, there will be inflation reports before the next FOMC meeting, but at this point it looks more likely there will be a rate cut in September, barring any large increases in inflation.