Latest news

MARKET VIEW

13.12.2021

If the Fed was following a pure inflation targeting strategy, its reaction function would logically have led it to tighten policy. But in addition to the goal of "price stability", the Fed’s mandate also aims for "maximum employment". Is the US economy at full employment, and if not, is it far from it? Depending on the answer to this question, the timing of policy rate hikes may change. Unfortunately, there is no single definition of full employment. We propose hereafter ten ways to measure it. In some cases, the box is already ticked. Others will follow in 2022. The job situation can no longer be used as an argument to postpone the first rate increase for a long time, but the pace of increases will be dictated by the inflation dynamics.

Full employment, a user’s manual

In the nearly 100 years since Keynes revolutionised economic thinking1, it has become standard practice to analyse employment in relation to the state of aggregate demand. As is well known, it was the shortfall of employment during the Great Depression that led him to propose this new approach. But the point here is not to revisit economic theory or history, but to ask whether the US economy is currently at or near full employment, after suffering in 2020 the sharpest (albeit brief) fall in activity since the 1930s. There is no single definition of full employment. We examine hereafter ten possible approaches.

1) When there are more jobs to be filled than there are unemployed.

It goes without saying that labour services are not homogeneous and that not every person can fill every other person's position for reasons such as training, geographical mobility, etc. These problems of matching labour to business needs were not created by the pandemic, but it is certain that hiring difficulties have been exacerbated as a result of the crisis - without prejudging the longer-term impact of the disruption of the education system over the past two years on the quality of the workforce.
That said, when the number of vacancies exceeds the number of unemployed, this is a clear reflection of labour market tensions. In the US, this threshold was crossed towards mid-2021. The number of job vacancies now exceeds ten million and the number of unemployed has fallen to around 7 million. The BLS has only published the job vacancy series since 2000, but it is possible to backcast it over a long period (chart). The ratio of unemployed to job vacancies only fell below one in the late 1960s (full employment) and in the two years preceding the pandemic (peak of the business cycle). Inter-temporal comparisons should be made with caution. The cost of advertising a job offer has fallen over time, perhaps leading firms to increase the number of job offers when they have recruitment difficulties.

Learn more

Disclaimer:
Disclaimers for Distribution by ODDO BHF SCA to Non-United States Investors:
This publication is produced by ODDO BHF Corporates & Markets, a division of ODDO BHF SCA (“ODDO”), which is licensed by the Autorité de Contrôle Prudentiel et de Résolution (ACPR) and regulated by the Autorité des Marchés Financiers (“AMF”).
This document, when distributed outside of the U.S., is intended exclusively for non-U.S. customers of ODDO and cannot be divulged to a third-party without prior written consent of ODDO. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. This document has been developed by our economists. It does not constitute a financial analysis and has not been developed in accordance with legal requirements designed to promote the independence of investment research. Accordingly, there are no prohibitions on personal dealing ahead of its dissemination. “Chinese walls” (information barriers) have been implemented to avert the unauthorized dissemination of confidential information and to prevent and manage situations of conflict of interest.
At the time of publication of this document, ODDO and/or one of its subsidiaries may have a conflict of interest with the issuer(s) mentioned. While all reasonable effort has been made to ensure that the information contained is not untrue or misleading at the time of publication, no representation is made as to its accuracy or completeness and it should not be relied upon as such. Past performances offer no guarantee as to future performances. All opinions expressed in the present document reflect the current context which is subject to change without notice. The statements, assumptions and forecasts contained in this document reflect the judgment of its author(s), unless otherwise specified, and do not reflect the judgment of any other person or of ODDO. This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this document is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice.
This document is for institutional investors only. It may not contain information necessary for others to make investment decisions. Consult your financial adviser or an investment professional if you are not an institutional investor.
Disclaimers for Distribution by ODDO BHF New York Corporation to United States Investors:
Please refer to the most recent research reports on the subject companies for complete information and relevant disclosures.
This document is produced by ODDO BHF Corporates & Markets, a division of ODDO BHF SCA ( “ODDO”). It is distributed to U.S. investors exclusively by ODDO BHF New York Corporation (“ONY”), MEMBER: FINRA/SIPC, and is intended exclusively for U.S. institutional customers of ONY and cannot be divulged to a third-party without prior written consent of ONY. This document is not and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. This document is being furnished to you for informational purposes only and should not be relied upon as sufficient to form a basis for any investment decision.
At the time of publication of this document, ODDO, and/or one of its subsidiaries may have investment banking and other business relationships with any of the companies in this report. While all reasonable effort has been made to ensure that the information contained is not untrue or misleading at the time of publication, no representation is made as to its accuracy or completeness and it should not be relied upon as such. However, ODDO has no obligation to update or amend any information contained in this publication. Past performance offers no guarantee as to future performance. All opinions expressed in the present document reflect the current context which is subject to change without notice. This document does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of particular clients. Clients should consider whether any advice or recommendation in this document is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice.
This document is not a research report as defined in FINRA Rule 2241(a)(11) because the material in it is limited to one or more of the exclusions of the definition of research report in Rule 2241(a)(11)(A). This document is for institutional investors only. Consult your financial adviser or an investment professional if you are not sure you are an institutional investor.
Disclosures Required by United States Laws and Regulations:
Rule 15a-6 Disclosure: Under Rule 15a-6(a), any transactions conducted by ODDO, and/or one of its subsidiaries with U.S. persons in the securities described in this document must be effected through ONY.
Contact Information of firm distributing investment recommendations to U.S. investors: ODDO BHF New York Corporation, MEMBER: FINRA/SIPC, is a wholly owned subsidiary of ODDO BHF SCA; Philippe Bouclainville, President ([email protected]) 150 East 52nd Street New York, NY 10022 212-481-4002.
Statement of conflict of interests of all companies mentioned in this document may be consulted on Oddo & Cie’s research site .