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US job market may be near tipping point, research shows
The research suggested that a continued drop in job openings will translate into faster increases in unemployment.
A hiring sign is seen in a cafe as the U.S. Labor Department released its July employment report, in Manhattan, New York City, U.S., August 5, 2022. / REUTERS/Andrew Kelly/File Photo
JACKSON HOLE, Wyoming (Reuters) - As inflation fell fast in 2023 and continued to slow this year, Federal Reserve officials were cheered that the steam seemed to come out of the U.S. economy not through rising unemployment but rather a decline in the large number of job openings businesses posted during the peak of the pandemic-era labor shortage.
But the economy may now be near a tipping point where a continued drop in job openings will translate into faster increases in unemployment, an argument in favor of the Fed beginning to cut interest rates to guard the labor market, according to new research presented on Aug. 23 at the Kansas City Fed's annual economic conference in Jackson Hole, Wyoming.
"Policymakers face two risks: being too slow to ease policy, potentially causing a 'hard landing' with high unemployment ... or cutting rates prematurely, leaving the economy vulnerable" to rising inflation, economists Pierpaolo Benigno of the University of Bern and Gauti B. Eggertsson of Brown University wrote in their research paper. Based on their new analysis of the job market, "our current assessment suggests the former risk outweighs the latter."
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