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September 4, 2023

Chart of the Week: US labour market cooling

by Fathom Consulting.

The US economy added 187,000 new jobs in August, beating analysts’ expectations. But the report also contained several signs that the labour market is cooling: the unemployment rate increased from 3.5% to 3.8%, wage growth fell, and the three-month, six-month and twelve-month moving averages for monthly job growth all declined. Temporary help services, an indicator which measures the number of workers on short-term contracts, also points to a slowdown, and has now fallen in nine out of the last ten months. Although this indicator gets less attention than others, it can be a useful leading indicator of economic activity. Indeed, it has fallen before each of the last three US recessions. In Fathom’s Global Outlook, Autumn 2023,[1] our central scenario sees the US economy slowing through next year, but avoiding recession – just. The recent decline in temporary help services appears to confirm a slowdown in the labour market, which, in the context of the other labour market data released on Friday, makes the 9-basis-point rise in the US 10-year Treasury yield that day even more surprising.

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[1] Charts and analysis from Fathom’s Global Outlook, Autumn 2023 will be available via Chartbook to users of Refinitiv Datastream, an LSEG business.

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