No one told employers last month that there was an economic slowdown.
The Bureau of Labor Statistics reported that employers added 528,000 new jobs in July, more than twice what economists had forecast, along with 28,000 more jobs than initially reported in May and June.
High job growth matched with high inflation still means that consumers don’t feel great about the economy, even if their personal financial situation might not be so bad. And as we get closer to the midterm elections, that could spell trouble for the incumbents in Congress.
Grid Managing Editor Kay Steiger asked Domestic Economics Reporter Matthew Zeitlin about the July jobs report. This interview has been edited for length and clarity.
Grid: What sticks out to you about this jobs report? Where is jobs growth the strongest, and where is it the weakest?
Matthew Zeitlin: The most noteworthy aspect of the job report is just how strong it is. Not only did the number of jobs created come in at higher than expected, the unemployment rate went down to 3.5 percent from 3.6 percent. And average hourly earnings for workers in the private sector, a closely watched figure now to see if wages are keeping with up or even leading to inflation, jumped 0.5 percent in July alone and have risen over 5 percent in the past year.
Former Obama administration economist Jason Furman described the report as “uncomfortably hot.”
G: We have just seen record numbers of jobs added month after month for the first half of this year. This is yet another big month. What does that tell us about the economy overall?
MZ: Considering the dramatic rise in interest rates — and the likelihood that the Fed will continue to do so — we might see some kind of slowdown in the future, but we’re clearly not there yet. In the immediate aftermath of the jobs report, stock market futures (bets on where stock prices will go when they stocks start trading) fell, and interest rates rose, indicating that the market expects this jobs report to strengthen the Federal Reserve’s resolve to keep raising rates.
While the Fed does not say it’s trying to engineer a recession, or even that it anticipates one as a result of its rate hiking plans (unlike, say, the Bank of England), it is pretty clear that it will see this jobs report as a sign to keep on going.
G: Unemployment is down, but I thought we saw that claims were ticking up. What’s going on here?
MZ: The initial claims figure just shows who recently lost their job and can file for unemployment benefits. It does not cover new hiring. According to this month’s jobs report, despite a tick up in claims for unemployment benefits from construction, food service and hospitality workers, those sectors all added on net tens of thousands of new jobs — 96,000 in the leisure and hospitality sector, and 32,000 in construction. While construction jobs have more than recovered from their February 2020 levels, the leisure and hospitality industry is still 7 percent short of its pre-covid job total.
An earlier report showed that layoffs had jumped up in the construction sector and the leisure and hospitality sectors, so businesses like restaurants and hotels. The construction figure is especially noteworthy because typically construction layoffs and discharges go down in the spring and summer and peak in the winter. This could be due to higher interest rates hitting new home construction, which has fallen off dramatically. As for leisure and hospitality, employers start shedding more employees at the end of the summer and into the fall, so the number picking up in June could be a sign of a weaker travel season, although the more recent hiring data shows employers still hungry for workers.
G: This is still an incredibly strong month for new jobs. So why is there all this recession talk?
MZ: As usual, what you think of the economy depends on where you look. We’re only now back at roughly the same level of total employment as we were before covid, so big numbers of new jobs from six months or a year ago are probably a thing of the past. But, still, more than 500,000 new jobs is one of the best jobs months of any year from about 2010 to 2020, and as a percentage of all jobs, and according to Mike Konczal of the Roosevelt Institute, it’s better than over 90 percent of monthly jobs reports since 1989.
Thanks to Lillian Barkley for copy editing this article.