The North American job market is still trying to find a new equilibrium after being knocked seriously off balance by the wild swings of the past two years. April’s moderate employment gains in both economies are arguably the most ‘normal’ figures we’ve seen since the pandemic began, and suggest that conditions are finally stabilizing—at least in terms of the headline numbers. For instance, unemployment rates are essentially right back to (the ultra-low) levels prevailing in early 2020, and employment has nearly recovered by most metrics (U.S. payrolls are still 0.8% below the 2020 peak). Even so, the job market is clearly far from normal, emerging from the pandemic with some of the tightest conditions ever seen, wage pressures rising rapidly, and the balance of power clearly shifting to employees. Yet, participation rates are recovering, and the economy is poised to slow (potentially markedly so). Which of these powerful forces will prevail for the inflation outlook in the coming year?
The Not-So-Great Resignation