(Finance) – The September jobs report has changed the narrative on the US labor market. September’s strong job gains and upward revisions to previous months have so far allayed fears that labor demand may be too weak to prevent the unemployment rate from continuing to rise. Economists say so Goldman Sachs in research on the topic, lowering the 12-month probability of recession by 5 percentage points to the historical average of 15%.
At the beginning Augustthe US investment bank had raised the probability of a recession from 15% to 25%, before reducing its forecast to 20% in the middle of the month, as the job market and retail sales showed signs of improving. resilience.
“Like many investors, we have been focused recently on the race between job growth and job supply growth. We expect job supply growth to slow substantially, but remain high enough to require 150-180,000 jobs per month to stabilize the unemployment rate”, say experts, who they see “no obvious reason why job growth should be mediocre at a time when job vacancies are high and GDP is growing strongly.”
According to Goldman Sachs, the labor market remains somewhat weaker than before the pandemic and the measures of labor market rigidity imply that the risks to the unemployment rate are still bilateral. But the decline in the unemployment rate in September offers preliminary support for the diagnosis that the earlier increase was largely caused by the temporary challenge of absorbing a wave of immigrant labor supply, which is now slowing. “This interpretation is consistent with the disproportionate contribution of new entrants, immigrants and young people to the increase in the unemployment rate,” it is underlined.
The investment bank says job growth puts the FOMC on a path of cuts of 25 basis points per hour; continues to forecast consecutive cuts of 25 basis points to a terminal rate of 3.25-3.5% by June 2025. If job growth remains solid and the unemployment rate does not rise further, then where to stop and how quickly to get there will likely be subject to debate next year in the review of the Fed’s framework.
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