Why Economists Fear This Labor Market

What is going on with the labor market? 

That seemed to be the question of the day last week when news revealed that the labor market was still going strong. 

To recap, data released on Thursday showed that job listings dropped to a two-month low of 9.8 million, just under what many economists thought the number would be. Layoffs fell slightly, and a steady number of Americans quit their jobs, implying confidence that they’d be able to find better-paying work. 

Why Economists Fear This Labor Market.

Following that, Friday’s jobs report showed that the US created 209,000 new jobs versus a projected 240,000.

So the labor market is slowing, but it’s not slowing to the point where the Federal Reserve is satisfied that it will help combat stubborn inflation. 

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This persistence in the labor market is one of the key reasons some economists believe that the recession many warned about may not be happening at all.

Good news, right? 

Not so in the eyes of many traders. 

That would explain why, last Thursday, the big stock indexes took a sharp turn downward following the release of the data. Traders were worried that this new data all but guarantees that the Fed will go back to raising rates for the foreseeable future. 

Chairman Powell had already suggested that at least two more hikes were on the way later this year after the recent pause. Now, that’s likely confirmed at this point. If the trend keeps up, some worry that there could be even more raises beyond the two and maybe even into next year in an extreme case. 

The longer those rate increases go on, the higher the chances are that we will see that recession that has been a long time coming. 

So the economy is constantly in a state of wait-and-see because of what we’ve been seeing over the past year or so. The next Federal Reserve meeting is in a few weeks, on July 25-26, and the chances that they will raise rates during that meeting are well above 95%. 

It remains to be seen if that will be the thing that affects the labor market in the way Fed officials want to see. Despite their best efforts, things haven’t gone exactly to plan, and it seems like the only way forward is to just keep applying pressure until something breaks. 

That’s why you see so many investment portfolios struggling as investors scramble for strategies that will help them weather the unknown. 

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The different factors coming together to create this environment definitely don’t make getting and staying ahead easy, but they don’t make it impossible either. 

With the right guidance and investment strategy, you can build your own portfolio in a way that your wealth has the best chance at being safeguarded from what’s to come. 

With the way the markets have been lately, it’s perfectly clear that the best course is to take action into your own hands. 

Doing so with a long-term strategy in mind can help you get ahead no matter what. 

Ryan Stancil

Ryan Stancil
Editor, Daily Profit Cycle