Recession Mongers Shocked & Horrified by this Surge in Employment

They pray that a recession will “force” the Fed to pivot. But it’s hard to have an official recession with job growth, rising wages.

By Wolf Richter for WOLF STREET.

It wasn’t the strongest job growth on record, but it was significant and exceeded the average job growth before the pandemic. Employers added 528,000 workers to their payrolls in July and 2.79 million in the past three months. Wages jumped, but less than runaway inflation, and the number of unemployed actively seeking work fell to the lowest since 2000, on the verge of a dotcom meltdown.

It was a shocking and terrifying disappointment for recession traders who want a recession more than anything because they thought it would “force” the Fed to pivot and start cutting rates – despite what the Fed actually says – and end 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 begun (far too late), so stocks can continue to inflate to the moon.

One day we will have a recession – there will always be one eventually. Struggling under this runaway inflation will likely require a recession, but a shallow recession might not be enough to do the job as this inflation becomes more entrenched.

But it’s just very difficult to have an official recession with this type of labor market, with job growth and rising wages, and with unemployment falling.

The National Bureau of Economic Research (NBER) calls recessions in the United States, and the NBER’s definition has been the same for decades, and it hasn’t changed, and their definition includes labor market measures, some of which that we have today.

This payroll strength is supported by other data, such as the still historically high number of job openings reported by employers for June, as well as the massive turnover and job switching among highly confident workers. who are looking for better paying jobs, and in a context of aggressive hiring. by employers to fill their positions.

Okay startups that incinerate money are now worried that they’re running out of money to incinerate because it’s become harder to get new fuel to incinerate, and they’re trying to lower their money consumption rate by lowering their payroll. Among them are Robinhood and other former high-flyers, some of whom became heroes in my Implosed Stocks column, who have lost tons of money in their lifetimes. But it’s a small – and very crazy – corner of the labor market, and the layoff numbers are tiny compared to the overall labor market.

Overall, layoffs and layoffs in June and in previous months hit historic lows. And there are still large-scale staffing shortages in the healthcare system, school systems, airlines and many other industries.

Thus, the total number of non-agricultural workers increased by 528,000 in July to reach 152.54 million workers, a new record, finally and for the first time beating the pre-pandemic peak, according to the Bureau of Labor survey. Statistics on establishments today. And this number of salaried workers continues to catch up with the pre-pandemic trend (green line):

Workers, including the self-employed and contractors.

Households reported that the number of people in employment, including the self-employed and contractors not captured in the employer data above, increased by 179,000 in July and 185,000 in July. over the past three months to reach 158.3 million.

Interestingly, the number of people on employers’ payrolls is rising sharply, while households are reporting a much smaller increase in the number of working people, which includes the self-employed and contractors. This could be partly due to the self-employed returning to regular employment in a company, where employers declare the gain, but for households, the person has just moved from being self-employed to being an employee of a company. . And that would make sense amid aggressive hiring by employers.

The number of unemployed at the lowest since the dotcom.

The number of unemployed people actively looking for work fell by 242,000 to 5.67 million, sitting slightly below the pre-pandemic low and marking the lowest level since the year 2000.

Labor is blocked.

The labor force – people who are working or actively seeking work – fell by 63,000 in July, the second consecutive month of decline, to 163.9 million, essentially where it was in February.

Much thought has been given to why the workforce has remained stuck. All sorts of logical reasons are cited that work together: The difficulty and expense of finding daycare; the need to care for elderly parents; excess mortality since 2020; health issues related to covid; a massive wave of “retirements” of people who have already had enough thanks to massive asset price inflation; and as I phrased it, ageism, where older people who want to work stop looking for work because they can’t convince anyone in their industry to take them seriously (especially in tech), and when ‘they stop looking for work, they leave the labor force. And the list of reasons goes on.

Many people, including the Fed, are now suggesting that the old normal workforce may never return, that there have been permanent shifts in the labor market that we are just trying to understand.

Salaries for non-executives have jumped, but remain overtaken by galloping inflation.

Average hourly wage of non-manager workers – coders, waiters, teachers, policemen, engineers, construction workers, etc. – jumped 0.4% in July from June, and 6.2% from a year ago to $27.45 an hour. This is the 10th year-over-year increase of more than 6% in a row.

These year-over-year increases of more than 6% – beyond the 2020 distortions – were the largest since the start of 1982. But they were still overtaken by runaway inflation, with US inflation CPI over 9%.

The employment-to-population ratiowhich tracks the percentage of people in the working-age population who are working, ticked up to 60% and is roughly in the same range since March, but a full percentage point below the pre-pandemic range by 61%, which corresponds to the labor force being blocked.

Unemployment rate, in its narrowest definition – the percentage of people who are in the labor force, but not working – has fallen slightly to 3.5%, where it was before the pandemic. If the labor market weakens, this rate will skyrocket, as it has every time before. But he remains anchored.

Do you like to read WOLF STREET and want to support it? You use ad blockers – I completely understand why – but you want to support the site? You can donate. I greatly appreciate it. Click on the mug of beer and iced tea to find out how:

Would you like to be notified by e-mail when WOLF STREET publishes a new article? Register here.

Leave a Comment