A new white paper from Penta and Oxford Economics finds that labor markets across a range of advanced economies are cooling rapidly. Utilizing daily sentiment data constructed using natural language processing of 400,000 text sources across a wide range of countries, languages, and topics, we pinpointed economic turning points in real-time across a range of economies.
- Our analysis identifies a synchronized cooling of employment growth over recent weeks in advanced economies. However, the extent of the slowdown is not uniform. Based on our indicator, the UK and France are already seeing falling employment. Elsewhere in Europe, labor markets in Germany and Italy are cooling rapidly, albeit from stronger starting points. Meanwhile in the U.S., the slowdown in employment growth is far more gradual, suggesting the Federal Reserve may have further to go before it can pause the tightening cycle.
- Wage growth does not yet seem to be slowing. This is not that surprising as wages are typically stickier than employment. Comfortingly, sentiment data suggest there is little evidence that the prolonged period of elevated inflation has led to a reacceleration of wage growth in most countries.
- Facing a weaker labor market and elevated inflation, consumer sentiment based on our measure is deteriorating quickly and points to a pullback in spending over the winter. Consistent with this, our data shows that recession concerns are the highest they have been since the pandemic.