US goes into midterm elections with a less dynamic form of full employment
SPY•The US enters the midterm elections with a 4.2% unemployment rate, but hiring is sluggish, the labor force has stagnated and inflation-adjusted after-tax income growth is below 2%. Manufacturing employment is 12.6 million, about 21,000 below the level in January 2025.
1. Low unemployment, slower growth
The 4.2% unemployment rate is low by historical standards and consistent with what most economists would regard as full employment. The economy is still adding jobs, but more slowly, and workers have less leverage to switch jobs for higher pay than during the post-pandemic boom.
2. Workforce and hiring pressures
The workforce remains below its record 171.5 million people who were working or looking for work, as population aging, low birth rates and immigration restrictions weigh on its growth. Layoffs and unemployment claims are low, but companies have also been slow to hire. A Conference Board survey found that fewer people said jobs were plentiful, while the share saying jobs were hard to get reached its highest level since January 2021.
3. Pay and manufacturing
Inflation-adjusted after-tax income growth has been below 2%, compared with annual growth of 3% that was more typical in prior years. Manufacturing employment stands at 12.6 million, about 21,000 below its January 2025 level and below a recent peak of 12.9 million during Joe Biden’s presidency.
