Increased inflation, hiring, and unemployment?

Running Point and its chief investment officer, Michael Ashley Schulman, CFA, were quoted by Forbes in an article—by Natalie Campisi, “Not Even Inflation Can Kill The Job Boom”—regarding whether unemployment will rise during the remainder of 2022.

What are the trends in inflation and hiring?

As indicated by the Labor Department’s recent employment report, more people (those waylaid by the pandemic, immigrants, and youth) continue to enter the U.S. labor force. Inflation and higher costs of living are motivating an increasing number of people to search for work. That trend will probably continue and nudge up unemployment numbers in the third quarter (Q3) of 2022.

In an unusual twist, however, higher unemployment may actually be an economic positive because it could provide the Federal Reserve Bank a better chance of saving the economy by curtailing wage inflation.

U.S. hiring will probably continue to slow from the brisk pace of last year as well as the first half of 2022, nonetheless, U.S. employers should still add a healthy number of workers in Q3 2022, and we may even see that number tick up in Q4 as the U.S. enters the holiday season. Technology and warehouse hiring will probably decline, but demand for services sector workers remains strong. Corporate America’s desire to increase employment is an encouraging economic indicator.

Quoted article excerpt is below:

“I believe that trend [higher labor participation rate] will continue and nudge up unemployment numbers,” says Michael Ashley Schulman, chief investment officer at Running Point Capital Advisors. “In this case, higher unemployment can be seen as a good thing because it gives Federal Reserve Board Chair Jerome Powell a better chance of saving the economy by stemming wage inflation.”

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