The Labor Department’s red-hot jobs numbers come Friday amid a growing consensus that the U.S. economy is losing momentum. The US economy shrank in the first two quarters of 2022, an informal definition of a recession. But most economists believe the strong labor market has kept the economy from slipping into recession.
Friday’s surprisingly strong report will no doubt intensify the debate over whether or not America is in recession. “Recession – what recession?” wrote Brian Coulton, chief economist at Fitch Ratings, after the numbers came out. “The U.S. economy is creating new jobs at an annual rate of 6 million, which is three times faster than what we typically see historically in a good year. “Economists had expected just 250,000 new jobs this year. month.
There are, of course, political implications in Friday’s jobs numbers: Americans have grown increasingly anxious about rising prices and the risk of a recession. It will no doubt be at the forefront of voters’ minds during November’s midterm elections as President Joe Biden’s Democrats seek to retain control of Congress.
Biden took credit Friday for the resilient labor market, saying “it’s the result of my economic plan.” The president has boosted job growth through his $1.9 billion coronavirus relief package and bipartisan $1 billion infrastructure bill last year. Republican lawmakers and some leading economists, however, point to this government spending as the reason for today’s inflation levels not seen in 40 years. And for millions of Americans, it’s the fading power of paychecks amid rising inflation that remains front and center. Hourly earnings posted a healthy 0.5% increase last month and rose 5.2% over the past year.
That’s not enough to keep up with inflation, which means many Americans, especially the poorest, have to cut corners in the face of high prices for groceries, gas and even materials school “There is more work to be done, but today’s jobs report shows that they are making significant progress for working families,” Biden said Friday.
The Labor Department also reviewed hiring for May and June, saying an additional 28,000 jobs were created in those months. Job growth was particularly strong last month in the healthcare industry and hotels and restaurants. The unemployment rate fell as the number of Americans who said they had jobs rose by 179,000 and the number who said they were unemployed fell by 242,000. But 61,000 Americans left the labor force in July, reducing the share of people working or looking for work to 62.1 percent last month from 62.2 percent in June.
While a strong labor market is good, it also makes it more likely that the Federal Reserve will continue to raise interest rates to cool the economy. “The strength of the labor market in the face of … Fed rate tightening already this year clearly shows that the Fed has more work to do,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “Overall, today’s report should put the notion of a near-term recession on the back burner for now.?
On Wall Street, the S&P 500 was 0.1 percent lower after nearly erasing an earlier loss of more than 1 percent. Investors appear to be weighing the positives of a strong labor market against the possibility that the Fed will continue to raise rates aggressively to cool the economy and inflation. The attempt to interpret wildly divergent economic data is made on both Wall Street and Main Street. New Yorker Karen Smalls, 46, started looking for work three weeks ago as a support staff for social workers. “I didn’t realize how good the job market is right now,” he said shortly after wrapping up his fifth interview this week.
“You look at the news and you see all these bad reports … but the job market is amazing right now.” A single mom, she’s weighing several offers, looking for one that’s close to her Manhattan home and pays enough to leave. she takes care of her two children.
This is a far cry from the situation two years ago, when the pandemic brought economic life to a near standstill as businesses closed and millions stayed at home. In March and April 2020, US employers cut 22 million jobs and the economy fell into a deep two-month recession.
But the massive government bailout, and the Fed’s decision to cut interest rates and pour money into the financial markets, fueled a surprisingly quick recovery. Surprised by the strength of the rebound, factories, shops, ports and freight yards were overwhelmed with orders and scrambled to bring back the workers they laid off when COVID-19 hit.
The result has been labor and supply shortages, delayed shipments, and rising prices. In the United States, inflation has been rising steadily for more than a year. In June, consumer prices rose 9.1% from a year earlier, the biggest increase since 1981. The Fed downplayed the resurgence of inflation, thinking prices were rising because of necks supply chain temporary bottles. Since then, he has acknowledged that the current wave of inflation is not, as it was once said, “transient”.
“Now the central bank is responding aggressively. It has raised its benchmark short-term interest rate four times this year and more rate hikes are on the way. In a report full of good news, the Labor Department noted that 3.9 million people were working part-time for economic reasons in July. , an increase of 303,000 on June. According to Labor economists, this “reflects a rise in the number of people whose hours were cut in due to lack of work in business conditions.
”Some employers are also reporting signs of an influx in the labor market. Aaron Sanandres, CEO and co-founder of Untuckit, an online clothing company with nearly 90 stores, has noticed that in recent weeks it’s gotten a little easier to fill jobs at corporate headquarters in New York and functions on time. partial in stores. For example, Sanandres noted that his company was able to hire two people in e-commerce in less than a month. In the past, it took more than twice as long.
“We had a lot of candidates,” added Sanandres. He also said the job market has been loosening for engineers, likely as a result of some layoffs at tech companies. Untuckit, like many retailers, has shed a fair share of hourly workers to offer jobs that offer more flexibility. Sanandres said the company still struggles with that competition, but it’s getting easier. The Labor Department reported Tuesday that employers posted 10.7 million job openings in June, a healthy number but the lowest since September.
Even with some tightening of the labor market in some sectors, the employment data released on Friday resoundingly shows a surprisingly strong labor market in the US. Recruitment laboratory. “Yes, output growth might be slowing and the economic outlook has some clouds on the horizon. But employers are still struggling to hire more workers.