Strong labor market in US continues: old correlations not working anylonger

The US is expecting recession for more than a year now and yet with every passing month, the case for recession is getting weaker atleast for 2023, when gauged on labor market data. US employers added 339,000 jobs last month (strongly beating the 190,000 Dow Jones estimate) while unemployment rate rose to 3.7% against the estimate of 3.5%. The job market has held remarkably well for an economy which is expected to slow down. Hourly wages increased 4.3%, which is 0.1% point below the estimate, on annual basis, showing some signs of moderating inflation. However, with job openings above 10 million, employers are still finding it hard to fill open positions.

As with Germany, even though the country has technically entered recession, it has reported strong labor shortages of both skilled and non skilled workforce. However, one can argue that with zero to negative economic growth, how is possible to have labor shortages on such a large scale.

The U.S. has had 5 consecutive quarters of YoY declines in productivity, according to research from EY-Parthenon, using data from the Federal Bureau of Labor Statistics. This has never happened before, going back to 1948. With fastest pace of rate hikes in 4 decades, ongoing mass layoffs, regional banking turmoil: the continued resiliency of US labor market has prompted us to think that old correlations of macroenomics are not working anylonger (alteast for past few months) and the level of uncertainity in the world remains very high.