Economists say the stronger-than-expected report suggests the U.S. is not yet in recession. But other economic factors point to one in the near future.
WASHINGTON — America’s hiring boom continued last month as employers added a surprising 528,000 jobs despite rising inflation and growing worries about a recession.
July hiring rose from 398,000 in June. The unemployment rate dropped to 3.5%.
The US economy shrank in the first two quarters of 2022 – the unofficial definition of a recession. But most economists believe that a strong job market has kept the economy from slipping into recession.
The American labor market has repeatedly defied skeptics this year. Economists had expected only 250,000 new jobs this month.
Friday’s numbers, of course, have political implications: Rising prices and the risk of a recession could weigh heavily on voters in November’s midterm elections as President Joe Biden’s Democrats try to retain control of Congress.
The economic backdrop is troubling: Gross domestic product — the broadest measure of economic output — fell in both the first and second quarters; A sustained decline in GDP is one definition of a recession. And inflation is at a 40-year high.
The current labor market’s resilience—particularly the low unemployment rate—is the biggest reason most economists still don’t believe a recession has begun, though they increasingly fear one is on the way. History is not entirely reassuring: when the 11-month recession began in December 1969, the unemployment rate was even lower at 3.5%.
The recession is not just an American problem.
In Britain, the Bank of England predicted on Thursday that the world’s fifth-largest economy will be in recession by the end of the year.
Russia’s war in Ukraine has darkened the whole Europe. The conflict has reduced energy supplies and raised prices. European countries are bracing for the possibility that Moscow will continue to reduce, and possibly cut off, the flow of natural gas used to power factories, generate electricity and keep homes warm in winter.
If Europeans cannot store enough gas for the colder months, the industry may be required to adjust the rate.
Economies have been on a wild ride since COVID-19 hit in early 2020.
The pandemic has brought economic life to a near halt, with businesses closing and consumers staying at home. In March and April 2020, American employers cut a staggering 22 million jobs, sending the economy into a two-month deep recession.
But massive government bailouts — and the Federal Reserve’s decision to cut interest rates and pour money into financial markets — spurred a surprisingly quick recovery. Caught off guard by the strength of the rebound, factories, stores, ports and freight yards were swamped with orders and scrambled to bring back workers they furloughed when COVID hit.
The result was labor and supply shortages, shipping delays, and rising prices. Inflation in the US has been steadily increasing for over a year. In June, consumer prices rose 9.1% from a year earlier – the largest increase since 1981.
The Fed underestimated the rebound in inflation, thinking prices were rising due to temporary bottlenecks in the supply chain. He acknowledged that current inflation is not as “transient” as it was once said to be.
Now the central bank is responding aggressively. It has quadrupled its benchmark short-term interest rate this year, and more rate hikes are on the way.
Higher borrowing costs hurt. For example, rising mortgage rates have cooled the hot housing market. Sales of previously occupied homes fell in June for the fifth month in a row.
Real estate companies, including lending firm loanDepot and online housing brokerage Redfin, have begun laying off workers.
The labor market is showing other signs of volatility.
The Labor Department said Tuesday that employers added 10.7 million jobs in June — a healthy number but the lowest since September.
And the four-week average number of Americans filing for unemployment benefits — a measure of layoffs that smooths out week-to-week changes — rose to the highest level since November last week, though the numbers may have been inflated by seasonal factors.
Friday’s jobs report comes at a critical time for President Biden, who has argued that the economy is merely slowing rather than heading into recession. Inflation has eroded public support for Biden, but the administration has pointed to a 3.6% unemployment rate and solid jobs as signs of a healthy economy.
White House press secretary Karine Jean-Pierre said the administration expects the pace of hiring to fall further in the coming months because the unemployment rate is already near historic lows and fewer potential workers are available.
A slower pace of hiring and lower wage growth may also signal easing inflationary pressures, but the White House is trying to reassure the American public that lower growth is positive at a time when Republican lawmakers say the recession is already in decline. started; they cite a decline in GDP in the first half of the year.
“We expect it to be close to 150,000 jobs per month,” Jean-Pierre said in a briefing on Thursday. “This kind of job growth is consistent with the low level of unemployment numbers we’ve seen.”
The Wells Fargo House Economist expects employers to continue adding jobs for several months. But rising interest rates, he said, would gradually stifle economic growth.
“We’re actually looking for a clear decline in hiring in the first quarter, maybe the second quarter of next year,” he said. “As monetary policy continues to tighten, this will affect overall business conditions and therefore the demand for workers.
“Our expectation is that the US economy will probably be in recession at the beginning of the year.”
Josh Boak in Washington and Courtney Bonnell in London contributed to this story.
Recession fears rise ahead of US jobs report
Source link Recession fears rise ahead of US jobs report