Despite the undeniably gloomy cast of the economy, employers have kept on hiring. The Bureau of Labor Statistics released numbers for June this Friday and found that the economy added 372,000 jobs while the unemployment rate remained at 3.6 percent. That’s 18 months of job growth, with monthly job figures well outpacing the recovery from the Great Recession. Even so, this month’s numbers were a surprise on the upside. Economists surveyed by Bloomberg had expected 265,000 news jobs and an unemployment rate of 3.6 percent.
But many economists, forecasters and business executives have been predicting a recession by the end of this year or sometime next year. Why? For one, the Federal Reserve has rapidly raised interest rates — and every sign is that it will continue to do so — intentionally slowing the housing markets and hammering the stock market. The Fed remains worried about inflation, something that the public cites as the top economic concern, and has shown that it’s willing to take on some economic pain in order to wrestle it back down.
Data from elsewhere in the economy remains mixed. People continue to travel and spend, making some CEOs wonder if a recession is more of a state of mind than an actual economic headwind. On the other hand, prices in key commodities like copper have been all over the place and in some cases trending down, which is often an indicator of global economic growth seizing up.
When it comes to actually defining a recession, however, there is no simple way of doing so, although Friday’s job data is a key input. While it’s a common perception that a recession occurs whenever there are two consecutive quarters of negative growth in gross domestic product, in reality it’s a judgment call made by a group of economists, and one of the factors they look at is what the jobs report measures: total employment. They also look at personal income, which has been hammered by inflation, as well as a number of other indicators like retail sales and industrial production.
Still, the jobs numbers show industries that depend on people getting out and doing — like hospitality — are still expanding, even if they’re not yet back at their pre-covid levels and are experiencing labor shortages.
Managing Editor Kay Steiger asked Domestic Economics Reporter Matthew Zeitlin about the most recent jobs report and other things going on in the economy.
Kay Steiger: What are the highlights of this jobs report?
Matthew Zeitlin: The biggest take-away is just the sheer number of jobs created. There’s been more gloominess around the economy in the past few weeks than at any time since the covid pandemic started. However, more than 100,000 more jobs were created than expected. The labor force participation rate, which measures the portion of the population working or looking for work, however, ticked down slightly. Early action in the bond and stock markets shows that many expect the strong jobs number to only encourage the Federal Reserve to continue to quickly raise interest rates.
Another interesting wrinkle is that one survey the Bureau of Labor Statistics uses actually showed a fall in overall employment. While the overall jobs number is derived from a survey of businesses, the unemployment rate is derived from a survey of households. This survey showed a decline in overall employment, which explains why the unemployment rate did not move even as the labor force shrunk.
KS: What industries are growing the most? Which ones are lagging?
MZ: One sector that really stood out in this report was leisure and hospitality, which includes things like restaurants and hotels, some of the industries worst hit by the pandemic. It added 67,000 jobs, with about two-thirds of that coming from restaurants and bars. It is still, however, 1.3 million jobs short of its pre-pandemic total employment. Another standout — and one of the few industries that’s exceeded its pre-pandemic employment levels — is transportation and warehousing, which added 36,000 jobs and is now three-quarters of a million jobs above where it was before the pandemic.
KS: Where do we sit employment-wise now versus pre-pandemic?
MZ: Before the pandemic, the unemployment rate was 3.5 percent, while total employment was 152.5 million, with 80.5 percent of the population between 25 and 54, the so-called prime age, employed. Today, the unemployment rate is 3.5 percent, total employment is 152 million, and 79.8 percent of 25-to-55-year-olds are employed.
KS: When might we start to see the Fed’s raising of interest rates start to show up in the jobs reports? What might we see when we do?
MZ: We already know that there have been layoffs in industries that are closely linked to stock market speculation and low interest rates. So far, it’s been concentrated in places like unprofitable technology companies backed by venture capital investors or the mortgage divisions of banks. Overall, however, layoffs remain low and quits remain high, meaning that many workers feel confident enough in their ability to get another job to leave their current one.
Thanks to Lillian Barkley for copy editing this article.