Recovery Underpinned: US Labor Market Shows Strength and Stability

The U.S. economy is finding its balance, as highlighted by a new employment report revealing both strong job growth and solid wage increases. Just a few months ago, the economy was like a puzzle with a troublesome piece: while consumer activity remained stable and overall growth was solid, the labor market appeared uncertain. However, with the new report, it seems the final puzzle piece is now falling into place. The current data for September show a significant increase in the hiring of new employees, a decline in the unemployment rate, and solidified wage increases—another indicator of the resilience of the U.S. economy. The latest findings indicate that the economy is in robust shape. Retrospective data revisions show that growth was stronger than previously thought and incomes more solid. Retail sales persist, and employers appear to continue meeting strong consumer demand by expanding their workforce. For the Federal Reserve, the White House, and Kamala Harris' presidential campaign, the newly revised data are welcome news. They underscore the possibility of a "soft landing"—a scenario where inflation decreases without major economic pain. Recently, economists have had to be cautious, as unforeseen developments over the summer led to a sharp rise in the unemployment rate. But the economic environment has now noticeably brightened. September data show not only a declining unemployment rate but also that job growth in the summer was stronger than previously thought. According to Michael Madowitz from the Roosevelt Institute, underestimating the U.S. economy could be a mistake. The labor market appears historically strong and provides a stable foundation for further economic developments. Companies have the opportunity to realign their business practices as work and consumption habits have stabilized. Demand for labor is widespread across all sectors, and productivity is rising. This suggests continued positive effects for workers, consumers, and businesses in the future. The Federal Reserve's existing approach to combating inflation seems successful: a rare "soft landing" is on the horizon, where growth deceleration is minimal. Julia Coronado of MacroPolicy Perspectives sees an end to the inflation and labor market predicament. For the Fed, this means a slower, more deliberate adjustment of interest rates—a cautious quarter-percent-steps policy is now possible. For the Biden administration, the new report provides validation of its economic policies. Kamala Harris can present voters with progress in her economic argument, supported by meaningful data that point to a sustainable recovery.