What Does The Jobs Report Tell Us About The Economy?

The rate of inflation has improved significantly from its peak, but wage growth remains the primary threat to allowing the Federal Reserve to end its hiking of short-term yields. Thus, last Friday’s jobs report is crucial to the outlook for monetary policy and the economy. On the surface, the rapid increase in the unemployment rate from 3.5% to 3.8% seems to paint a picture of a rapidly deteriorating labor market, but there is a need for more nuance here.

The increase in unemployment was a healthy increase in the labor force rather than a decline in employment. This development will give rise to hopes that wage growth can moderate due to the added supply of labor rather than a reduction in demand for workers, which accompanies an economic slowdown.