release of the U.S. employment report triggers a flurry exchange market to new information in the report (see (Foreign Currency–U.S. Dollar). Bank officials are concerned the tight labor market could drive inflation expectations, Source: Charles Schwab, Bureau of Economic Analysis, Bloomberg. The Non-Farm Payrolls report is arguably one of the biggest market movers in the forex market. If you are looking for a report that creates a lot of volatility. FOREX LESSONS FOR BEGINNERS FREE
Though this has eased slightly in recent months, there are still nearly two job openings for every unemployed worker. Workers have also felt more emboldened by the hot labor market to seek other job openings and companies have sought to retain their existing workers, resulting in elevated quits and suppressed layoffs in the economy. On the demand side, excess demand has been driven by booming economic growth in as the economy reopened and many companies saw very strong revenue growth.
On the supply side, diminished legal immigration and a large wave of early retirements during the pandemic shrunk the size of the labor pool significantly. Importantly, the strong demand for labor relative to supply also implies that if a recession does arrive, it should be a relatively mild one for workers. The labor market remains a bright spot for the economy. The labor market continues to be a bright spot in an otherwise gloomy environment, with the unemployment rate at 3.
Excess labor demand should resolve itself over the next few years as businesses facing lower revenues reduce hiring and workers facing inflation pressures reenter the labor market with higher wages. However, as the labor market gradually transitions back to normality, the economy could still see some months of solid job growth and low unemployment. Low unemployment had also led to strong wage gains during this expansion and we expect this will persist.
However, given the unusual speed of this economic cycle, there is still uncertainty as to how quickly labor demand dries up and how much labor force participation may rise in an economy facing both an acute labor shortage and rapidly declining growth in aggregate demand.
Inflation is falling but its moderation will be gradual. Inflation continues to be the predominant concern for market participants and the Fed. After peaking at 9. On the bright side, broad inflation pressures look set to ease in the year ahead. Wage growth will likely moderate as the labor market rebalances and shelter costs will soon stop accelerating as younger households reach their limits on higher rents.
Global supply chains have also improved and, along with declining commodity prices, this should allow a broad range of goods and materials prices to stabilize. Meanwhile, inflation expectations of consumers, Treasury market investors, and professional forecasters are only slightly elevated from their historical averages, with average annual CPI inflation over the next five years expected to be within a range of 2.
While the pathway to normal will likely be bumpy, receding supply pressures and stable expectations should allow inflation to ease over the next few years, regardless of whether the economy falls into recession. Global economic momentum is also slowing sharply.
Elevated inflation and tighter financial conditions have become a global phenomenon with weakness broad-based in the global economy. This slide displays a heatmap of composite PMIs manufacturing and services across the world with red representing weakness and green representing strength. After a boomy post-pandemic global recovery, this chart clearly shows momentum has declined over the course of In Europe and the United Kingdom, economic activity has faltered due to higher energy prices and commodity shortages resulting from the war in Ukraine.
Central banks have also adopted more hawkish policy positions to combat sharply rising inflation. At the start of the year, the key policy rates of the European Central Bank and the Bank of England were at Today, they have risen to 0. Growth has also been particularly weak in China due to a host of issues including the knock-on effects of the Ukraine war, the regulatory crackdown last year, a collapsing housing market and an aggressive zero-Covid containment policy.
China may relax some of these policies after the October Communist Party Congress, but in the short run, Chinese economic growth is likely to remain depressed. The dollar has soared this year. After 15 years of steady appreciation against foreign currencies, the U. An aggressive Fed, economic problems overseas and geopolitical uncertainty from the war in Ukraine have all sent the dollar higher. This strength has mixed implications for the U. This deficit is likely to widen further over the next year, further undermining the competitiveness of the U.
In the long run, we expect economic forces to gradually drive the dollar down. In the near term, this process could be accelerated if there is a ceasefire on the war in Ukraine or if the Federal Reserve pivots to a less hawkish monetary policy.
In the first half of the year, operating EPS fell by 3. However, companies may have difficulty in meeting even these modest estimates. While energy companies will continue to benefit from high margins, elsewhere, rising labor costs, higher interest rates and slowing nominal sales growth should bite into profits.
In addition, a much higher dollar will erode the value of overseas sales while recession concerns could lead company managements to book more discretionary losses while they have a macroeconomic excuse to do so. Underemployment The unemployment rate measures the share of the labour force that is not employed but is actively seeking employment. The underemployment rate takes a broader view of underutilisation.
In Australia, it measures the share of the labour force that is employed, but is not fully utilised. This usually refers to those working part time involuntarily because they could not find full-time work, or those who would like to work more hours.
Together, the unemployed and underemployed rates add up to the labour underutilisation rate. Unemployment and underemployment generally move closely together. Both increased during the global financial crisis in most advanced economies and have declined significantly in recent years Graph 2. However, there appear to be higher rates of underemployment for a given unemployment rate across a range of advanced economies in the post-crisis period.
This points to more spare capacity than the unemployment rates imply. In Japan, both the underemployment and unemployment rates are below pre-crisis rates, but the unemployment rate has declined more sharply. The share of part-time workers who would prefer full-time work is around its pre-crisis level. In the United States and Canada, the underemployment rate is back at its pre-crisis rate. This is consistent with the unemployment rate for Canada, while in the United States the unemployment rate has fallen even further.
The divergence is quite stark in the United Kingdom, where the underemployment rate remains elevated while the unemployment rate has declined to be well below its pre-crisis rate. In the euro area and Australia, both the underemployment and unemployment rates are above pre-crisis rates.
In the euro area, underemployment increased across the region following the financial crisis, but is most elevated in the member countries that were most affected by the euro area's sovereign debt crisis. With the exception of Germany, the underemployment rate has not significantly declined since the crisis in euro area economies.
Graph 2 Long-term unemployment Periods of high unemployment are associated with increases in the long-term unemployment rate; conversely, a tighter labour market enables the long-term unemployed to be re-employed. In the United States, the long-term unemployment rate spiked sharply during the financial crisis, and more than 40 per cent of the unemployed were classified as long term from to Graph 3. The United Kingdom and Canada also saw significant increases at around the same time. In the euro area, the long-term unemployment rate peaked after the sovereign debt crisis, at which point over half of the unemployed were long-term unemployed.
Across most economies, the long-term unemployment rate has not declined as sharply as the unemployment rate. The long-term unemployment rate has declined in the United States and the United Kingdom to approximately pre-crisis levels as the labour markets improved; but the unemployment rate has fallen further. Canada, the euro area and Australia have seen only modest improvement, and the shares of long-term unemployed remain above pre-crisis levels.
Although some euro area countries, such as Germany, have lower rates of long-term unemployment, Greece and Italy are experiencing very high rates. Japan has followed a different trajectory to the other advanced economies. The long-term unemployment share has increased steadily since the mid s and is above pre-crisis levels, which is at odds with the strengthening labour market implied by other indicators.
This is likely to reflect the dominance of structural factors such as skill mismatches due to changes in industry composition. Naganuma and Uno find much of the increase in the long-term unemployment rate is due to males aged 25 to 44; they point to the shift away from manufacturing as well as a persistent cohort effect for those who graduated in the s, a time of significant labour market slack.
Graph 3 Youth unemployment Youth unemployment is particularly cyclical, because younger people's lower experience and skill levels make them especially sensitive to changes in demand for labour. It may therefore be a useful metric for spare labour market capacity. Youth unemployment rates increased sharply in advanced economies following the financial crisis. More recently, youth unemployment rates have declined in Japan, the United States, the United Kingdom and Canada, where they are now below their pre-crisis levels.
In the euro area, however, youth unemployment remains elevated relative to its pre-crisis level despite the significant fall in aggregate unemployment in the region since This suggests ongoing spare capacity. But, as is often the case, the aggregate rate for the euro area masks wide divergences in the member economies.
In Germany, youth unemployment has declined to be well below its pre-crisis rate; the Netherlands has also returned to around pre-crisis rates of youth unemployment. However, in the majority of euro area economies, youth unemployment remains well above pre-crisis rates, particularly in Italy, Spain and Greece.
The elevated youth unemployment rates in these countries are closely mirroring their still high unemployment rates. Youth unemployment in Australia has remained higher than before the financial crisis; for a detailed discussion of the Australian youth labour market see Dhillon and Cassidy , in this Bulletin. Participation rates Participation rates can also provide information about the cyclical conditions in the labour market. Typically, stronger employment growth encourages growth in the labour force as well, with jobs filled not only by the unemployed, but also by those previously outside the labour force.
In tight labour markets, employers might need to offer more favourable conditions to attract workers and this can encourage participation. Discouraged workers may find jobs or resume job searching, and higher wages and more flexible conditions might attract non-participants and encourage older workers to remain in employment for longer. While the participation rate is affected by cyclical developments, it is also affected by structural drivers.
One of these is population ageing, which weighs on the aggregate participation rate because older people have lower participation rates. We follow Brown and Guttmann to adjust the participation rate for the ageing of the population by assuming the population shares in each age cohort are unchanged from This shows that labour force participation rates within age cohorts have been increasing across most advanced economies Graph 4.
Disentangling structural factors other than age composition, such as improved health outcomes RBA , from the cyclical effect remains difficult. The longer-run upward trend in the age-adjusted participation rates in a number of economies points to a role for structural forces, but the sharp pick-up in age-adjusted participation rates in some economies in recent years suggests cyclical factors are also at work, consistent with the tighter labour markets.
The United States is a notable exception; even adjusted for ageing, the participation rate has declined because some younger groups particularly males aged 25 to 54 have reduced their participation rates; this is likely to be a discouraged worker effect of the high unemployment following the global financial crisis. More recently, the United States participation rate has stabilised and the age-adjusted rate has largely recovered from its fall during the crisis. Graph 4 Average hours worked The average number of hours worked can also be expected to move with labour market conditions: in tight labour markets, employers may increase hours for those staff seeking additional work before hiring new employees.
This can be achieved, for example, by offering full-time jobs to part-time workers, more part-time hours for part-time workers or more overtime. When there is more spare labour market capacity, workers may not be able to gain as many hours of work as they would like and may accept part-time work if they cannot find full-time work; businesses may require less overtime, and may reduce hours for existing staff rather than lowering employee numbers Bishop, Gustafsson and Plumb Average hours worked is a useful additional metric as changes in hours in response to labour market conditions are not captured by employment growth and the unemployment rate; for example, employment growth does not increase if a part-time job is replaced with a full-time job, and unemployment does not increase if a worker's hours are reduced.
However, structural forces also affect the average number of hours worked: a longer-term downward trend in average hours can be observed for all economies Graph 5. In many advanced economies, the share of workers preferring to work part time has increased; this may partly be because technological change, changes to the nature of work, and childcare and retirement policies have allowed women and older workers to increase their participation in ways that were not previously possible.
A cyclical effect can also be observed in the sharp decline in hours worked across advanced economies consistent with the deterioration in labour market conditions following the global financial crisis. In the United States and the United Kingdom, hours rebounded promptly to around pre-crisis levels, and have since been quite steady.
In Canada and the euro area, hours have been broadly flat since declines seen during the crisis. In Japan and Australia, hours worked have continued to decline and are well below pre-crisis levels. In the euro area and Australia this could be, in part, because the underemployment rates are still elevated, though it may also reflect the structural forces behind the trend decline. Graph 5 The balance between cyclical and structural factors likely differs by economy.
Brouillette et al find that the decline in Canadian hours is broadly based across sector, region, sex, age groups and across full- and part-time work. Similarly, Bishop et al conclude the composition of employment has not been the main driver of the decline in average hours during downturns and recessions in Australia. On the other hand, in Japan there has been an increased policy focus on reducing excessive overtime hours worked and a significant increase in part-time work.
More generally, employers are also using more attractive work practices including flexible work to compete in the increasingly tight labour market Harding While there may be little underemployment associated with voluntary part-time work, these workers may still represent additional capacity if they would increase their hours for higher wages. Job vacancies Job vacancies can convey information about employment prospects, and thus contribute to an assessment of labour market conditions. The ratio of job vacancies to unemployed people tends to increase when labour markets are tight; a higher ratio means that there are more jobs available and fewer job seekers.
The vacancy ratio declined sharply in the United States and Japan as the unemployment rate increased; declines in the euro area were more modest Graph 6. The vacancy ratios have increased across the board as labour markets have strengthened.
Indeed, based on the vacancy ratio, the labour market is exceptionally tight in Japan: the vacancy ratio is the highest since , and there are around 60 per cent more vacancies than there are unemployed people. In the United States, Canada and the United Kingdom, the vacancy ratios are well above their pre-crisis levels, with an especially sharp increase in recent months in Canada.
In the euro area, it is slightly above its pre-crisis level. However, the euro area vacancy ratio also masks significant regional variation: at one extreme, Germany's vacancy ratio is at a series high, and on the other, Spain's indicates a much larger degree of slack remaining in the labour market.
It is a major component of any economy and is intricately linked to markets for capital , goods, and services. Key Takeaways The labor market refers to the supply of and demand for labor, in which employees provide the supply and employers provide the demand. The labor market should be viewed at both the macroeconomic and microeconomic levels.
Unemployment rates and labor productivity rates are two important macroeconomic gauges. Individual wages and the number of hours worked are two important microeconomic gauges. In the United States, the Bureau of Labor Statistics compiles detailed reports on national and local labor markets. Understanding the Labor Market At the macroeconomic level, supply and demand are influenced by domestic and international market dynamics, as well as factors such as immigration, the age of the population, and education levels.
Relevant measures include unemployment, productivity, participation rates , total income , and gross domestic product GDP. At the microeconomic level, individual firms interact with employees, hiring them, firing them, and raising or cutting wages and hours.
The relationship between supply and demand influences the number of hours employees work and the compensation they receive in wages, salary, and benefits. The U. Labor Market The macroeconomic view of the labor market can be difficult to capture, but a few data points can give investors, economists, and policymakers an idea of its health. The first is unemployment.
During times of economic stress, the demand for labor lags behind supply, driving unemployment up. High rates of unemployment exacerbate economic stagnation, contribute to social upheaval, and deprive large numbers of people of the opportunity to lead fulfilling lives. In the U. However, more than 6 million people filed unemployment claims in a single week in April ; that number dropped to a little more than 1 million people in the week ending Aug.
Department of Labor. Labor productivity is another important gauge of the labor market and broader economic health, measuring the output produced per hour of labor. Productivity has risen in many economies, the U. Workers have been creating more goods and services per unit of time, but they have not been earning much more in compensation.
An analysis of U. Bureau of Labor Statistics data by the Economic Policy Institute showed that while net productivity rose More Labor Supply Than Demand The fact that productivity growth has outstripped wage growth means that the supply of labor has outpaced the demand for it. The Labor Market in Macroeconomic Theory According to the macroeconomic theory, the fact that wage growth lags productivity growth indicates that the supply of labor has outpaced demand.
When that happens, there is downward pressure on wages, as workers compete for a scarce number of jobs and employers have their pick of the labor force. Conversely, if demand outpaces supply, there is upward pressure on wages, as workers have more bargaining power and are more likely to be able to switch to a higher paying job, while employers must compete for scarce labor. For example, an increase in immigration to a country can grow the labor supply and potentially depress wages, particularly for unskilled jobs.
An aging population can deplete the supply of labor and potentially drive up wages. A country with an aging population will see demand for many goods and services decline , while demand for healthcare increases. Not every worker who loses their job can simply move into healthcare work, particularly if the jobs in demand are highly skilled and specialized, such as doctors and nurses. The earliest prices are blue and the latest prices are red. The medians and the value areas are marked with the white lines and display the most important price areas.
Traders tend to return to those areas if the volume of the breakout movement is not too high. High-volume breakout out of these areas signifies a real breakout. This is done when ColorBullBear is set to true. Rectangle sessions This example demonstrates how the indicator can display a market profile based on the rectangle chart objects freely drawn by a trader. For this to work, a rectangle object's name has to start with MPR and the Session input parameter has to be set to Rectangle.
You can press 'r' on your keyboard to add such a rectangle to the chart automatically. Right-to-left display Market Profile indicator can also draw histogram from right to left. Unlike the traditional left-to-right display, it can be helpful to focus on the current trading session, without obscuring its chart.
You can see how this works on the chart screenshot below. It is very similar to its MetaTrader siblings, but cannot work with push notification alerts. Downloads ver. You are encouraged to actively participate in the improvement of this indicator by submitting your own features via pull-requests and reviewing existing suggestions, changes, fixes, and so on.