Labor data suggests a ‘soft landing’ could be imminent, say economists

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The US economy edged closer to a “soft landing” after a new batch of labor data, economists said.

Soft lying is a good thing. It would mean that the Federal Reserve has accomplished the difficult task of stopping inflation without bringing back a recession.

Job openings, a barometer of employer demand for workers, fell 617,000 to 8.7 million in October, the lowest level since March 2021, the U.S. Labor Department reported Tuesday in its monthly Job Openings and Labor Turnover Survey.

“Another key ingredient of a soft landing is falling into place,” said Jason Furman, a professor at Harvard University and former chairman of the White House Council of Economic Advisers during the Obama administration. write about job openings.

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“This is the best possible outcome,” said Julia Pollak, chief economist at ZipRecruiter. “And I think the chances are [for it] growing higher and higher all the time. We are very, very close.”

There is no official definition for a soft landing. According to conventional wisdom, it has only been accomplished once — in 1994-95 — in the history of the Fed’s 11 monetary policy tightening cycles dating back to 1965, the American Economic Association wrote.

How the labor market is responding

Why the labor market is already ‘back to balance’

The latest jobs data added to the encouraging news of a soft landing, economists said.

A major pullback in job openings coincided with weakness elsewhere. Stops and hires held steady around their pre-pandemic levels. Layoffs are still low and are about 17% below their pre-pandemic baseline, suggesting that employers want to keep up with workers, Pollak said.

Despite the large monthly decline, job openings are still 25% above their February 2020 level, she said.

It really is the best possible product. And I think the possibilities [for it] growing higher and higher all the time.

Julia Pollak

chief economist at ZipRecruiter

In short: The labor market has cooled while layoffs have not increased and workers still have job security and good prospects, economists said.

“It’s still a favorable labor market,” Pollak said.

However, workers have lost leverage compared to 2021 and 2022. Large pay increases are less common, and they are not signing bonuses. While there are still plenty of job opportunities, they are harder to come by, Pollak said. Outside of industries like health care, where there is a severe labor shortage, the opportunities are “less attractive,” she said.

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