Psagot Report Highlights Cooling Israeli Labor Market and Surging U.S. Yields
Psagot report details a cooling Israeli labor market with declining youth participation, alongside surging U.S. Treasury yields and rising inflation pressures.
A recent Psagot report highlights a cooling labor market alongside rising inflationary pressures in the United States and a sharp increase in government bond yields. In the U.S., macroeconomic data point to continued economic expansion and persistent inflationary pressures, with the 2-year and 10-year Treasury yield spread narrowing to just 25 basis points with no signs of recession.
The composite Purchasing Managers' Index (PMI) for manufacturing and services rose in September for the fourth consecutive month to 58.4 points, compared to 56 points in August, signaling the fastest expansion pace in over five years. Meanwhile, U.S. Treasury bond yields surged, with the 10-year yield crossing the 5% threshold to reach 5.17%, the highest level since June 2007. The 30-year yield climbed to 5.47%, a peak not seen since June 2004, while the 2-year yield rose to 4.87%.
Labor Market Trends and Economic Growth
In Israel, labor market data point to a moderate cooling trend, though analysts at Psagot assess that this is not yet significant enough to prompt the Bank of Israel to implement another interest rate cut. The labor force participation rate in August dropped by 0.4 percentage points to 61.8%, with participation among young adults aged 15 to 24 falling to 33.0%, among the lowest levels in history.
"The labor market is showing initial signs of cooling, particularly among younger demographics, while core participation remains relatively stable," notes the market analysis.
Among prime working-age individuals aged 25 to 64, the participation rate edged down slightly, holding stable around 81% for roughly a year and a half. The official unemployment rate decreased by 0.3 percentage points to 2.8%, partly driven by the decline in the overall participation rate, while broader unemployment dropped to a historical low of 3.9%.
Sectoral Shifts and Job Openings
Simultaneously, the number of temporarily absent workers surged to 552,800 in August, up from 342,700 in July, largely attributed to summer vacations. On the demand side, job openings decreased by 3,180 in August, pushing the job-seeker to vacancy ratio to 1.13 compared to 1.04 in July. The sharpest declines in open positions were recorded in the construction and services sectors.
Despite the broader cooling trends, the high-tech sector continued to demonstrate robust demand for talent, with open positions rising to 18,800—accounting for 13.2% of all job openings, compared to an average of 11.8% throughout 2025.
