The U.S. job market reminds me of the way the character Mugatu describes the male fashion model Hansel in the 2001 film Zoolander.
“So hot right now.”
Currently, there are around 11.3 million open jobs in the United States, compared to just 6.2 million unemployed people. That’s a gap of about 5 million more open jobs than unemployed persons.
When we take the ratio between these two measures, we get the orange line on the chart above. At nearly 1.7, this is the highest the ratio has been in the history of this data, going back roughly two decades.
I call this the “Powell Indicator” because Fed Chair Jerome Powell cited this as one of the key reasons inflation is currently a problem for the U.S. economy.
“There are roughly 1.7 job openings for every unemployed person,” Powell said, “So that’s a very, very tight labor market. Tight to an unhealthy level, I would say.”
In other words, there is a shortage of workers. And when there is a shortage of something, its price goes up.
Price, in the case of labor, is wages. And if wage increases get out of hand, it can lead to the dreaded “wage-price spiral,” in which prices and wages continuously grow in a circular feedback loop.
This is something the Fed is keen to prevent…
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Indices mentioned are unmanaged, do not incur fees, and cannot be invested into directly.
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