US: Labour market is tightening - AmpGFX

Greg Gibbs, Analyst at Amplifying Global FX Capital, explains that while there may be structural impediments to wage growth, the tightening US labour market suggests that it should start to rise at some point.

Key Quotes

“Unemployment claims are at their low since 1971, considering the growth in population over that time this is remarkably low, well below the previous cyclical troughs over the last 30 years.”

“The number of job openings in February was at a record as a percentage of the number of unemployed since openings data started in 2001.  The data show that there is near to one job opening for every unemployed person.”

“The unemployment rate has been stable at 4.1% since Oct, and the U-6 underemployment rate that includes people working part-time for economic reasons and those marginally attached to the labor force has actually ticked up from 8.0% in October last year to 8.2% in Feb.  However, a number of indicators suggest that these measures may fall further soon.”

“The FOMC median forecast predicts that the unemployment rate will fall to 3.8% this year, and to 3.6% in the next two years, well below its median estimate of neutral unemployment of 4.5%; an estimate they have consistently lowered as actual unemployment has undershot expectations without (yet) notably pushing up wages.”

“The Fed and the market should be vigilant for signs of wages accelerating.”