The September jobs report was delayed because of the government shutdown, but economists forecast it will show only about 50,000 new jobs added and the unemployment rate holding steady at around 4.2%. A majority of these jobs were in the healthcare sector. This data suggests that although the labour market is not collapsing, its strength is clearly diminishing and growth remains weak.
Using the IS-LM framework, this weaker job growth and stable unemployment rate imply a leftward shift of the IS curve. Lower job creation means less income and consumption, reducing aggregate demand. Meanwhile, if the central bank reacts by easing monetary policy, the LM curve shifts right. This puts the new equilibrium at lower output. This framework aligns with the article's predictions.
Interesting to see that the labor market isn't fully collapsing but it may be losing steam and pointing towards weak economic growth overall
ReplyDeleteSlower job growth clearly signals weakening demand, showing the challenge the Fed faces in supporting the economy while keeping inflation in check.
ReplyDeleteThe delayed report and small job gains you describe really show how slow the labor market has become, even if unemployment hasn’t jumped. Do you think this kind of weak but steady data will actually be enough to push the Fed into more rate cuts soon?
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