They are praying for a recession to “force” the Fed to turn around. But it is difficult to have an official recession with an increase in employment and an increase in wages..
By Wolf Richter for WOLF STREET.
It wasn’t the biggest growth in jobs in history, but it was big and outpaced pre-pandemic average job growth. Employers added 528,000 workers to their payrolls in July and 2.79 million in the last three months. Wages rose, but less than raging inflation, and the number of unemployed actively looking for work fell to the lowest level since 2000, on the verge of the dot-com bust.
It was a huge disappointment for the recession mongers who want a recession more than anything because, to their way of thinking, it would “force” the Fed to pivot and start cutting rates, despite what the Fed says and put an end to this horrible QT in a market that is addicted to QE and will suffocate under QT. They want the Fed to reverse the tightening even though it has barely started (too late), so that stocks can continue to inflate to the moon.
One day we are going to have a recession, eventually there is always one. Going under this raging inflation is likely to require a recession, but a shallow recession might not be enough to do the job, as this inflation is taking ever more entrenched hold.
But it’s very difficult to have an official recession with this kind of labor market, with job growth and wages rising sharply, and unemployment falling.
The National Bureau of Economic Research (NBER) reports recessions in the US, and the NBER’s definition has been the same for decades, and hasn’t changed, and their definition includes labor market metrics, some of which we have today.
This strength in payrolls is supported by other data, such as the still historically high number of job openings that employers reported in June, coupled with massive turnover and job switching among highly confident workers seeking higher-paying jobs, and in the midst of aggressive hiring. by employers to fill their jobs.
Granted, startups that incinerate cash are now worried about running out of cash to incinerate as getting new fuel to incinerate has become more difficult and they are trying to reduce their cash burn rates by cutting their payroll. Among them are Robinhood and other former high-flyers, some of whom have become heroes in my Imploded Stocks column, who have lost loads of money during their existence. But that’s a small, and very crazy, corner of the job market, and the layoff numbers are miniscule compared to the job market as a whole.
Overall, layoffs and layoffs in June and in the months prior were at record lows. And there are still large-scale staffing shortages in the health care system, school systems, airlines, and many other industries.
Then, the total number of workers on nonfarm payrolls rose by 528,000 in July to 152.54 million workers, a new record, finally and for the first time surpassing the pre-pandemic high, according to the Bureau of Labor Statistics survey of establishments. from today. And this number of workers on payroll continues to catch up with the pre-pandemic trend (green line):
Workers, including freelancers and entrepreneurs.
Households reported that the number of people with jobs, including the self-employed and entrepreneurs who are not included in previous employer data, increased by 179,000 in July and by 185,000 in the last three months to 158.3 million.
Interestingly, the number of people on employer payrolls is rising sharply, while households report a much smaller increase in the number of people working, which includes the self-employed and entrepreneurs. This could be due in part to self-employment returning to regular employment at a company, where employers report the earnings, but for households, the person simply went from self-employment to being on a company’s payroll. business. And that would make sense amid aggressive hiring by employers.
The lowest number of unemployed since dotcom.
The number of unemployed actively looking for work fell by 242,000 to 5.67 million, below the pre-pandemic low and marking the lowest level since 2000.
The workforce is stagnant.
The labor force — people who are working or actively looking for work — fell by 63,000 in July, the second straight month of declines, to 163.9 million, essentially where it had been in February.
Much thought has been given to why the workforce has stagnated. All sorts of logical reasons are cited that work together: the difficulty and cost of finding child care; the need to care for elderly family members; excess mortality since 2020; health problems associated with covid; a massive wave of “retirements” of people who already have enough thanks to massive asset price inflation; and like I said, ageism, where older people who want to work stop looking for jobs because they can’t get anyone in their industry to take them seriously (particularly in tech), and when they stop looking for jobs, they get out of hand working. And the list of reasons goes on.
Many people, including the Federal Reserve, are now suggesting that the old normal workforce may never return, that there were permanent changes in the labor market that we are now trying to figure out.
Non-manager salaries rose, but were still outpaced by raging inflation.
Average earnings per hour not management workers – programmers, waiters, teachers, police officers, engineers, construction workers, etc. – increased 0.4% in July from June and 6.2% from a year ago to $27.45 an hour. This was the 10th year-over-year increase of more than 6% in a row.
These year-over-year increases of more than 6%, distortions aside in 2020, were the largest since early 1982. But they were still outpaced by raging inflation, with CPI inflation exceeding 9%.
The employed population ratewhich tracks the percentage of working-age people who are working, rose to 60% and has been in roughly the same range since March, but a full percentage point below the pre-pandemic range of 61%, which parallels the workforce gets stuck.
the unemployment rate, At its narrowest definition, the percentage of people who are in the labor force, but not working, has dropped to 3.5%, where it had been before the pandemic. If the labor market weakens, this rate will skyrocket, as it has before. But it’s still grounded.
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