Semi-Normal

Ahead of tomorrow's employment report the labour market is "semi-normal". Demand is easing but supply hasn't quite caught up.

US job openings fell another 296k in April, but remain 465k above their November 2018 peak. (Figure 1)

Potential demand for labour (civilian employment + Job openings) has effectively remained flat since May 2022, while the labour force has struggled to catch up. Normalisation in the labour market now looks like more of a question of supply rather than demand. (Figure 2)

A scaled measure of overall labour market tightness suggests that we are back to pre-pandemic levels, (when the labour market was relatively tight by historical standards. (Figure 3)

However, if leading indicators such as the quits rate or the new hiring rate are anything to go by the demand for labour could soften more than the headline data currently suggests.

For example, the rate of new hires in the US are below where they were in April 2008. (Figure 4)

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