By Dr. Michel Léonard, Chief Economist and Data Scientist, Triple-I
US employment remains more resilient than expected due to monetary tightening, adding 253,000 jobs in April and lowering unemployment to 3.4 percent in April from 3.5 percent in March.
Job growth has been positive for the past 26 months, and the US economy has now replaced most of the jobs lost at the start of the pandemic. employment for Insurance Companies and Related Activities The subsector specifically continues to outpace broader US employment. The insurance industry unemployment rate was 1.6 percent in April, up from 1.5 percent in March.
Employment resilience and the current record low unemployment rate are likely to add to the pressure from inflation hawks on the Fed to not only continue to raise rates, but also to make each rate hike bigger. . Under the Triple-I model, the gap between actual employment and the pre-COVID trend, which has been narrowing since the end of the pandemic, is likely to stabilize at its current level.
Consistent with this forecast and our discussions with policymakers, our view is that the stronger-than-expected labor performance in April is unlikely to prompt the Fed to aggressively accelerate the pace of current monetary tightening; however, you can extend the duration of the current hardening cycle.
US employment has steadily returned to its pre-COVID growth trend. This shows great resilience, given the monetary tightening. Expect the Fed to continue with “Slow and Steady Wins the Race,” even though calls for “Monetary Shock and Awe” will likely get louder.