The Sharp Drop in the US Job Market Could Be Help The Country Dodge Recession

Jeremy Siegel - Economist
Jeremy Siegel - Economist

A significant slump in the US job market could be the unlikely key to dodging a recession, Jeremy Siegel has said.

“Employment has yet to soften notably, but I think the jobs data is likely to deteriorate meaningfully and quickly,” the Wharton finance professor said in his weekly commentary for WisdomTree, published on Monday.

Siegel highlighted an unexpectedly sharp plunge in unit labor costs in November, according to the latest Producer Price Index (PPI) report. He said the drop is caused by increased productivity and companies getting rid of excess labor. 

“We’re not going to have a strong job market, but we might have stronger GDP and we might have stronger margins, and we may not have a recession,” Siegel said on the “Behind the Markets” podcast, released on Monday.

Companies cutting off surplus workers could push unemployment higher, which might lead the Federal Reserve to stop increasing interest rates, Siegel said. The US central bank has already brought them from near zero in March to over 4% today in an effort to tame inflation, which has skyrocketed to 40-year highs this year.