US: Unemployment will continue to trend down with the fed tightening - ANZ

According to analysts at ANZ, US household optimism is reflected in rising consumer confidence and ongoing momentum in the labour market and improving household balance sheets have elevated confidence to new cycle highs.

Key Quotes

“A critical question for the Fed is whether this lift in confidence will drive prime-aged workers who are not in the labour force to return, brining needed slack to a tight labour market. With additional slack, the Fed may be able to delay tightening policy.”

“Although prime-aged workers have been returning to the labour force since early 2016, demographic headwinds have acted as a counterbalance, keeping participation rates relatively stable and unemployment trending lower.”

“We believe these trends are set to continue and expect participation rates to remain around these levels. With the outright number of unemployed still falling, this implies the economy will continue to operate at or near ‘full employment.’ The Fed is likely to continue their gradual path of tightening.”