Why worries about American job losses are overstated

Subscribe to enjoy similar stories. Everyone is gloomy about America’s jobs market. Investors talk of a “K-shaped" economy, in which growth is buoyed by an exuberant stockmarket and artificial-intelligence investment, while ordinary Americans languish.

Job creation and overall economic growth, which usually move in tandem, have diverged. The Federal Reserve has cut interest rates at its two most recent meetings. Jerome Powell, the central bank’s chair, calls the loosening “risk management", or insurance against a deeper downturn.

Christopher Waller, a contender to replace Mr Powell, is pushing for further and faster cuts, beginning at the next meeting on December 10th, to support a weakening labour market. Look closer, however, and much of the gloom seems to be overdone. American workers have been on a hell of a run.

For almost a decade, barring a nasty few months during the covid-19 pandemic, the unemployment rate has bounced around near 50-year lows. Wages have surged, too—fast enough to outpace even the highest inflation since the 1970s. As a consequence, the poorest Americans have flourished: real wages for America’s lowest earners are up by 19% since 2015, compared with an 11% rise for the highest.

Meanwhile, inflation is still elevated at 3%, and it is almost five years since the Fed met its 2% target. Why, then, the rush to cut rates, and the fears of a jobs-pocalypse? The case for concern has three parts. First, even if there have been no disasters yet, things are undoubtedly moving in the wrong direction.

Job openings have been edging down—gradually but consistently—for the past year or two. Unemployment is creeping up. This is concerning since employment has a tendency to grow slowly and crash quickly.