Qatar National Bank (QNB) said the US economy continues to demonstrate resilience in the face of current domestic and external pressures, despite a moderation in the labour market and increased economic uncertainty.
In its weekly commentary, the bank said the moderation in the pace of hiring represents a gradual return to more balanced conditions rather than broad-based weakness, as the labour market remains resilient and wage growth continues to support household purchasing power.
QNB explained that the escalation of the conflict between the United States and Iran and the resulting spike in energy prices have weighed on business and consumer confidence, while raising concerns about renewed inflationary pressures and slower economic growth.
Against this backdrop, the resilience of the US labour market has become a key determinant of the economy’s ability to withstand these headwinds and avoid a more pronounced slowdown.
The bank noted that recent labour market data offer reasons for cautious optimism, with a broad range of indicators continuing to point to fundamentally healthy labour market conditions. It pointed out that the unemployment rate has remained broadly unchanged from its average level last year, indicating that the moderation in hiring has not translated into a meaningful deterioration in overall labour market conditions.
QNB identified three key factors underpinning the resilience of the US labour market and the broader economy.
First, the bank said labour demand has moderated but remains consistent with a healthy labour market. Job creation has slowed over the past year, while firms have become more cautious about expanding their workforces amid elevated uncertainty and weaker business confidence.
At the same time, QNB noted that job openings have continued to decline, bringing the vacancy-to-unemployment ratio - the number of available jobs for every unemployed worker - from a peak of around 2.0 in early 2022 to close to 1.0 in the most recent release, broadly in line with its pre-pandemic average.
The bank explained that the ratio is closely monitored by the Federal Reserve as a measure of labour market tightness. A ratio well above one indicates that there are substantially more job vacancies than unemployed workers, often leading to stronger wage pressures, whereas a ratio closer to one suggests a more balanced labour market.
QNB pointed out that initial jobless claims and layoff rates remain historically low, indicating that firms continue to retain workers. Taken together, these indicators point to an orderly normalisation in labour demand rather than the broad-based deterioration that typically precedes a recession, the bank said.
Second, QNB said wage growth has continued to support household purchasing power. Although nominal wage growth has moderated from the elevated rates observed in recent years, workers’ earnings have generally continued to outpace inflation over the past year, despite a temporary resurgence in price pressures following the energy shock.
The bank noted that wage increases have, on average, exceeded increases in the cost of living, allowing real wages - that is, wages after accounting for inflation - to continue increasing over the past year. As a result, households have experienced sustained gains in purchasing power, helping to support consumer spending, which accounts for around 70% of US GDP.
Consequently, QNB said, stronger household purchasing power continues to underpin domestic demand and reinforce the resilience of the broader economy.
Regarding the third factor, the bank said artificial intelligence is beginning to reshape the labour market, although its aggregate impact remains limited.
QNB pointed out that the rapid adoption of AI technologies is changing hiring patterns across a growing number of industries, particularly in occupations involving routine cognitive tasks such as administrative support, customer service and software development. At the same time, demand for workers with AI-related and advanced technical skills has continued to increase.
Despite widespread concerns about job displacement, the bank said there is still limited evidence that AI has materially weakened overall labour market conditions. Employment continues to expand, unemployment remains close to levels consistent with full employment, and layoff rates remain historically low.
QNB said current evidence suggests that AI is primarily changing the composition of jobs and the skills demanded by employers rather than reducing total employment.
The bank concluded that the recent moderation in the US labour market should be interpreted as a normalisation rather than a sign of broad-based weakness. Labour demand has become more balanced, while wage growth continues to support household purchasing power despite recent inflationary pressures. At the same time, the impact of AI on aggregate employment remains limited.
QNB said the resilience of the labor market continues to support consumer spending and strengthen the US economy’s ability to withstand current challenges.
