Job Recovery Reaches Plateau

I read an interesting article this Monday morning, “Jobs Recovery Reaches Plateau, Posing a Challenge for Forecasters” By Eric Morath and Jeffrey Sparshott.

Both Eric and Jeff offer some key points on reaching a plateau.  Some may feel this is a concerning sign, while others feel it is a more typical result from a steady increase in the economy for the past several years.

Here are some key paragraphs from their article below:

After a half-decade of steady gains, the U.S. labor market appears to be leveling off. What that plateau means for the economy’s trajectory is one of the biggest questions hanging over policy makers and investors.

Hiring is consistent but slower than in recent years, the unemployment rate is no longer falling and layoffs are holding at a historically low level. But participation in the workforce is stuck near a 40-year low.

If the moderate hiring rate continues, that should keep the unemployment rate in check by absorbing new entrants to the workforce. That’s a good thing, but it might not be enough to deliver significantly higher paychecks for workers or draw discouraged Americans back into the labor force.

Mixed signals from the labor data pose a challenge to companies forecasting future demand, Federal Reserve policy makers attempting to set interest rates and investors trying to assess the climate ahead.

The labor market “is close to as good as it gets,” given the underlying fundamentals of the economy, said IHS Markit Chief Economist Nariman Behravesh. “But averages hide a lot of problems. A lot of low-skilled and blue-collar workers have been left behind. They might have a job, but it pays less than the job they had before the recession.”

“I do think that it’s fair to say that the pace of improvement has slowed,” said Tom Porcelli, chief U.S. economist at RBC Capital Markets. “The plateau can go on for a while, or a slow easing toward a recession can go on for a while.”

That can leave businesses uncertain, especially when the lackluster expansion in the U.S. is outpacing developed economies in Europe and Asia. Companies have already reacted by curtailing capital investment, creating a drag on the U.S. expansion this year, which has so far been offset by consumer spending.

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