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The US economy has been sending some mixed signals in the latest batches of economic data. In some cases, including employment data, there are divergent signals even within individual reports.
Federal Reserve Chair Jerome Powell said that while he is certainly watching for any signs of trouble that may emerge in the employment data, broader labor force trends so far appear to be in “good shape.”
“We all monitor the labor market very, very carefully, and I don’t see those cracks today,” Powell said. “And we followed every possible crack story, but the big picture is really a strong labor market.”
He pointed to factors such as the low hiring rate, which has raised some concern. And he said some economists and analysts have argued that if layoffs were to increase, that could lead to a “pretty rapid increase” in unemployment.
“That’s something we’re watching, but we don’t see it,” the Federal Reserve chairman said.
Powell added that initial jobless claims (another area he said he is watching closely) remain very low. At the moment, he said, he doesn’t see any unexpected weakening of the labor market.
The extreme imbalances seen in the labor market at the beginning of the pandemic have largely disappeared, Powell said. “The recovery has largely resolved itself,” he said, adding that wage growth, while still strong, is gradually returning to more sustainable levels.
“In many, many respects, things are returning more to where they were in 2019, which we can consider normal for this purpose,” Powell said. “The labor market is in good shape.”
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