from dr Michel Léonard, Chief Economist and Data Scientist, Triple-I
US employment remains more resilient than expected amid monetary tightening, which added 253k jobs in April and brought unemployment down to 3.4 percent in April from 3.5 percent in March.
Job growth has been positive over the past 26 months, with the US economy now replacing most of the jobs lost early in the pandemic. employment for the Insurance carriers and related activities The sub-sector in particular continues to outperform overall US employment. The unemployment rate in the insurance industry was 1.6 percent in April, up from 1.5 percent in March.
The resilience of employment and the historically low current unemployment rate are likely to increase pressure from inflation hawks on the Fed not only to keep raising rates, but to make each rate hike bigger. Based on Triple-I’s model, the spread between actual employment and the pre-COVID forward trend, which has narrowed since the end of the pandemic, is expected to stabilize at current levels.
Consistent with this forecast and our discussions with policymakers, we believe that stronger-than-expected employment developments in April are unlikely to prompt the Fed to aggressively accelerate the pace of the current policy tightening; however, it can lengthen the duration of the current tightening cycle.
US employment steadily returns to its pre-COVID growth trend. This shows great resilience in the face of monetary tightening. Expect the Fed to continue with ‘slow and steady winning the race’, although calls for ‘monetary shock and awe’ are likely to grow louder.
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