United States, solid employment and slowing wages: a figure that makes us dream of the “soft landing”

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In an uncertain and tense economic scenario, the American labor market offers data that encourages unexpected sighs of relief. Job creation remains robust, with 223,000 new payrolls in December, good for closing 2022 with 4.5 million new jobs, the second best performance in contemporary history, at least since 1940. And the jobless rate is back to its all-time low, at 3 .5% from 3.7% in November. But the new jobs have slowed down from the immediately preceding months, continuing a trend that began in July. Above all, it has slowed the march of wages, which has become a crucial concern for the spirals of price increases.

Slowing wages

Hourly wages increased by a modest 0.3% in the month on the previous month. In the last year they have risen by 4.6%, slowing down from 4.8% reported in November (data also revised downwards) and highlighting the most contained trend for over a year, since August 2021. If posts and rates unemployment beat expectations, while wages missed them, thus ensuring a double encouraging surprise on the health of the economy and the effectiveness of the Federal Reserve’s monetary policy in bringing the whole scenario back under the banner of moderation.

Biden thanks

The belated Christmas and New Year’s gift certainly heartened the Biden administration. The President wasted no time in issuing a statement calling the statistics “great news for our economy”, as well as a sign that his “economic strategy is working” backed by “unemployment at a 50-year low and the two strongest years of job creation in history. The great hope of the White House remains unsaid, and not only that: that in the end the US economy, against most forecasts, will be able to avoid an open recession despite the aggressive monetary policy tightening maneuvers triggered by the Fed, taking a path considered difficult and improbable of so-called “soft landing”, of soft landing of growth, sufficient to bring inflation under control which in 2022 reached its 40-year high.

The soft landing dream

Numerous analysts also read reassuring indications in the new battery of data. “If the US economy is slipping into a recession, no one has told the job market,” S&P Global’s Chris Varvares said. The new data moderates the pace compared to the recent past but remains “almost double compared to what the trend growth would be”. Berenberg’s Mickey Levy added that the figure reflected “robust but cooling labor demand and high but moderating wage growth.” The ideal scenario – dubbed Goldilocks, ie fairytale – is finding growing followers even among the prudent exponents of the Central Bank. A few hours before the new employment data, James Bullard, head of the St. Louis office, explicitly stated that the chances of a soft landing have increased thanks to the kind of resistance shown by the labor market.

The great unknowns

The games are less than done. If a reminder of caution is in order, look again at the central bank. The top Fed and the chairman Jerome Powell, to underline the uncertainty that reigns, have repeatedly stressed that monetary policy remains committed to bringing inflation under control at all costs, directed towards the ideal target of 2 percent. And they warned the markets in particular against excessive optimism, which by easing financial conditions could damage the Fed’s action and, if anything, force it to raise interest rates more and to keep them higher for longer. After the datum, thethe stock market has ralliedwith major Wall Street indexes jumping 1.5 percent.