UNC economist: "I guarantee" a slowdown |  WRAL Tech Wire

UNC economist: “I guarantee” a slowdown | WRAL Tech Wire

CHAPEL HILL – The Department of Labor’s latest jobs report leaves open the key question for the US economy, said Dr. Gerald Cohen, chief economist at the Kenan Institute at the University of North Carolina at Chapel Hill.

This question: if we will experience a recession or if the country can still go through a “soft landing”.

The US labor market continues to defy expectations. On Friday, the Labor Department announced that American businesses added 263,000 jobs in November – more than expected by experts and a sign of a strong economy.

But there is another warning sign that worries economists.

The spread between the 10-year Treasury bill and the 3-month Treasury bill indicates that we are still very likely to experience a recession at some point over the next year, Cohen noted.

This spread measures the difference between long-term and short-term interest rates in predicting a recession. Each time it fell below zero, the United States entered a recession. And it just fell below zero last month.

Recession on the way

Slide: Kenan Institute (Screen capture of a virtual presentation given by Dr. Gerald Cohen, Chief Economist at the Kenan Institute.)

“Over the next year to 18 months, I think we will have a recession based on this indicator,” Cohen said. “But this data suggests that we are not there yet.”

There will be an economic slowdown, but most likely it will be mild, Cohen said. “I guarantee you there will be a downturn,” he said.

Jump in jobs ‘not good’ for fighting inflation, says NCSU economist

What is happening

And the latest jobs report numbers, which beat analysts’ and economists’ expectations, mean the Federal Reserve may still have some work to do, said Dr. Michael Walden, economist and professor emeritus William Neal. Reynolds at North Carolina State University, in an interview. with WRAL TechWire on Friday about the better-than-expected jobs report.

“In combination with yesterday’s strong consumer spending report, it appears that the Fed’s efforts to significantly slow the economy have yet to have a big impact,” Walden said.

From a demographic perspective, Cohen explained, the US economy is expected to have employment growth of about 100,000 or so on a monthly basis. Thus, numbers that approach this mark would characterize a soft landing potential, while negative numbers would indicate a recession. But beyond that mark, one would expect to see the Federal Reserve continue to consider raising the federal funds rate in a continued attempt to combat rising inflation.

“Until we start cutting jobs, we need people coming into the workforce to fill those jobs,” Cohen said. “Our turnout overall remains well below pre-pandemic levels.”

Participation of prime-age workers is close to pre-pandemic levels, but still a bit below. The national unemployment rate is 3.7%. That’s near a 50-year low.

The triangle economy remains strong and competitive

There’s no reason to think the Triangle will experience a substantial slowdown in the regional economy or the competitive labor market where there are still hundreds of thousands of open jobs, Cohen noted.

“The Triangle, in particular, we have a particularly strong labor market and a strong economy, due to the region’s very strong growth and the influx of employment companies coming in,” Cohen said. “I think that [Triangle companies] will continue to say that they should continue to seek out as many good people as possible.

This is due in part to companies such as Google and others opening new offices in the region and planning to hire hundreds – if not thousands – of workers in the region.

“They’re going to continue to increase the competition for skilled labor, and it’s not just for skilled labor,” Cohen said. Adding new high-wage jobs to the regional economy is likely to create local labor market spillovers, which could mean more service sector jobs, more construction jobs and more spending in the region, as workers take high salaries. positions in growing companies.

“There’s nothing in this report that makes me think we’re seeing a substantial downturn in the Triangle region,” Cohen said.

The Federal Reserve’s recent series of interest rate hikes, designed to fight inflation and slow job creation, has yet to have the desired effect. This means that workers are privileged and in a strong position to demand higher wages.

“I think employees have the upper hand and can continue to push for wage gains,” Cohen said.

And while there has been some concern among the headlines in recent weeks over layoffs and hiring freezes, Cohen noted that the latest jobs report and analysis conducted by the Kenan Institute show that the employment in the technology sector continues to increase.

“Another discussion that’s been really negative is the tech sector,” Cohen said. “And yet, all the talk of hiring freezes and layoffs, employment continues to grow in the tech sector.”

Jobs are down in Triangle – is it time to panic?

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