CUNA Senior Economist Ligia Vado discusses the current conditions of the labor market in the June 2023 CUNA Economic Update.    

“In our most recent economic forecast for credit unions and the economy, we updated our prediction to a scenario that is more in line with a soft landing of contracting monetary policy,” she said. “That is a scenario in which the Federal Reserve can tame down inflation without causing a recession. The main reason for this change in the forecast is the strength of the labor market.” 

Highlights from the most recent update include:   

• The labor market remains strong with monthly nonfarm payroll gains inconsistent with previous recessionary periods. 
• Excess labor demand pre-pandemic trend was exacerbated by a pandemic induced reduction in labor force participation. 
• Reservation wage is still high, though workers’ bargaining power has substantially decreased in some industries. 

“Strong labor market translates to stable disposable income for consumers, which boost aggregate demand and propels economic growth.” Vado said.  

Labor market trends:  

• With a moving average of 269,000 jobs additions monthly, current job additions still signal a very robust labor market. 
• The unemployment rate was 3.7% in May, the same as pre-pandemic levels, increasing from 3.5% the previous month.  
• Labor force participation decreased more than three percentage points during the COVID-19 pandemic and has then slowly increased. 
• Month over month job growth, combined with the lower labor force participation of two large age groups, has produced an imbalance in the labor market, with demand exceeding supply by a factor of 1.7. 
• Wages are on an elevated trend. Notably for credit unions, financial activity wages are the highest ranked among all industries.