While economic growth is slowing, the jobs market hasn't been this strong since the 1950s. Unemployment is plumbing half century lows — a development that has everyone from central banks to politicians scratching their heads, writes Ian Verrender.
Fear, meanwhile, is spreading through money markets which, for more than a year, have been flashing red about an imminent recession. Stock markets, however, are heading in the opposite direction. Wall Street is experiencing a bout of exuberance, the likes of which is rarely seen.
Not so long ago, in time before we were all sent home, the "natural rate" of unemployment was considered to be around 5 per cent. With that level of joblessness, inflation tended to stick within a manageable level between 2 and 3 per cent. Initially, it was thought that an influx of foreign workers in tandem with a slowing economy would send the jobless rate quickly back towards 5 per cent.
"You don't have a recession when you have 500,000 jobs and the lowest unemployment rate in more than 50 years," she said. The grey bars in the graph above indicate US recessions going back to 1950 and through to the height of the pandemic. And the pattern is always the same. The jobs market is strong right up until the economy tips into recession.
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