US jobs resilience shows easing labour supply limits: Fitch Ratings

19 Aug '23

2 min read

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Insights

Fitch Ratings sees the continuing US payroll gains as a sign of wider economic resilience, but feels the 2.7 million expansion in payrolls in 15 months reflects easing labour supply constraints rather than robust labour demand growth.
It continues to expect payrolls to start falling before year-end.
The share of adults in work remains well below pre-COVID-19 rates.

Fitch Ratings perceives the continuing payroll gains in the United States as a sign of wider US economic resilience, but it feels the 2.7 million expansion in payrolls in the past 15 months there reflects easing labour supply constraints rather than robust growth in labour demand.

This has allowed actual employment to catch up with companies’ desired employment levels after suffering severe labour shortages in 2021, the rating agency said in its latest Economics Dashboard.

Despite recent jobs growth, the share of adults in work remains well below pre-COVID-19 pandemic rates. This reflects the lasting fall in labour force participation rates and shows the impact of labour supply constraints on the post-pandemic jobs recovery, Fitch Ratings said in a release.

The pick-up in jobs in 2021 lagged well behind the rapid recovery in gross domestic product (GDP) despite a strong rebound in ‘desired’ labour demand.

In the event, companies were unable to fill all the positions they were seeking to hire for, owing to an anaemic recovery in the labour force, Fitch Ratings said in a release.

But the supply constraints that dampened employment growth in 2021 started to ease from mid-2022 as net immigration flows recovered, boosting the labour force.

The rating agency’s measure of desired labour demand has risen by only 0.3 million since March 2022 as job openings have fallen by 2.4 million.

It continues to expect payrolls to start falling before year-end.

ALCHEMPro News Desk (DS)

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