The US labour market is still running hot, with very large numbers of quits and new hiring compared to normal. But the data suggests that it is starting to cool off and wage growth may have peaked. The process will pick up pace if layoffs accelerate and workers who withdrew from the labour force because of COVID continue to return and if markets will likely react strongly to that: they will price in a Fed pivot well before the Fed is ready to change it's rhetoric.
The supply of labour has continued to normalise towards Pre-Covid levels:
2: The marginal demand for labour is falling as vacancies are filled:
3. Employment Growth Has Been Slowing Since March
Total Employment (log level)
4: Layoffs are edging higher at the moment; they typically jump during recessions along with weekly claims and the unemployment rate
5. As a result of the nascent rebalancing of supply and demand in the labour market, the momentum of average hourly earnings *may* have peaked. However, given the experience of the 70's - which had multiple false peaks, it's likely that the Fed would want to see this come down much further before acknowledging their 'other' mandate.
