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LinkUp Forecasting Strong Job Gains in February Even As Labor Demand Continues to Decline

Mar. 01, 2023 Source: Toby Dayton, LinkUp CEO

Surprising to no one, the raging debate about the state of the economy, the direction it’s heading in, what the Fed should do about it, and what the Fed will do about it continues to escalate to unprecedented levels of intensity, divisiveness, and animosity.

The ongoing imbalance between the supply and demand for labor, combined with the large share of labor costs in the services sector, suggests that high inflation may come down only slowly.

Philip Jefferson, Board of Governors

Federal Reserve

But as we noted last September, unlike the jobless recovery of 2010-2015 which was entirely a phenomena of demand, the post-pandemic recovery has always been centered entirely around supply – the supply of goods (2021), then services (2022), and throughout, the supply of labor.

Soft landing chart FEB23 1024x648

In my opinion, the fundamental medium-term characterization of the U.S. economy has shifted from one of deficient aggregate demand to one of deficient aggregate supply. Yes, the pandemic contributed to this but there is a lot more going on.

Mohamed El-Erian

The Financial Times

FEB23 NFP Forecast

Based on our data and despite the continued decline in labor demand, we are forecasting a net gain of 365,000 jobs in February. This dichotomy between declining labor demand and continued robust monthly job gains is a topic we’ll return to in subsequent posts, especially given the bleak and pessimistic but highly flawed assessments offered by those relying solely on noisy job board data, but for now we’ll leave it there.

If one thought the debate around the economy and the Fed’s ability to navigate through it wasn’t deafening enough, wait until next week’s jobs report comes out.

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