A worker wearing a protective mask slices beef in the butcher section of a Stew Leonard’s supermarket in Paramus, New Jersey, Tuesday, May 12, 2020.
Angus Mordent | Bloomberg | Getty Images
June’s big payroll jump helped lift the clouds of recession for the US economy that still faces some stormy weather ahead.
Work 372,000. benefit of Convinced most Wall Street economists that the idea of a first-half recession is “hypothetical,” as one put it. The 3.6% unemployment rate is hardly in line with the economic slowdown, at least for the six months of 2022 that are in retrospect.
But there will still be much to deal with going forward as several rounds of persistent high inflation and interest rate hikes test the economy’s ability to stay strong.
“I think we have a way to go,” said Vincent Reinhart, chief economist at Dreyfus & Mellon. “It was a long report on evidence of aggregate demand and short on evidence of aggregate supply. But four months in a row of nearly 400,000 jobs makes you feel a little different about the prospect of two quarters in a row of GDP declines.”
For the record, the US economy contracted 1.6% in the first quarter and is on pace to decline 1.2% in the second quarter, according to the Atlanta Federal Reserve. GDPNow Tracker, Negative GDP is the widely accepted definition of recession for two consecutive quarters.
potential trouble spots
However, monthly job growth this year averaged 457,000, even with a slight slowdown that began in March. The unemployment rate has stood at 3.6% over the past four months, a combination of solid payroll gains and stubbornly low growth in the labor force.
Nevertheless, there were some weak indications in the report, such as a 315,000. decline of In a survey of Labor Department homes. The labor force saw an exodus of 353,000, and is still around Two job openings for every available workerIncreases an inflationary phenomenon in which supply has badly outstripped demand in the economy.
Then there’s the big belief that the unemployment rate is the worst indicator of a recession, with jobs typically continuing to rise in the early days of a recession and then continuing to decline during the early days of recovery.
But anyone trying to find signs of a slowdown in corporate America’s recruiting practices will come up with a blank.
“Overall, the jobs data support our view that the economy in recession is still hypothetical, while wage numbers are easing inflationary pressures,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics. He added that the “bearish story was overpriced” by markets and that the Fed is still likely to continue raising interest rates.
Pay attention to inflation and rates
It is those rate hikes, and the inflation they want to control, that raises concerns that all is not clear for the domestic economy.
Average hourly earnings rose 0.3% from a month ago but were still up 5.1% on a 12-month basis. Stronger-than-expected pay and jobs numbers are unlikely to deter Fed officials from approving 75 basis points interest rate hike Later in their meeting in July.
Overall inflation in May was operating at 8.6% annualized rate, according to the Consumer Price Index. The latest CPI data comes on Wednesday, with economists expecting the number to be even higher given the jump in gas prices for the month.
If inflation persists and rates continue to rise, it could slow the economy down to the point that it slips into recession in the next year or so. multiple economists increasing your chances of recession Most recently, the recession is expected to begin in late 2022 or early next year.
“The US economy is still expanding, and job growth is strong enough to survive a recession for now, but aggressive rate hikes could lead to a physical slowdown,” the Wilmington Trust said in response to the jobs report. “We expect the US and global economies to avoid recession over the next 9-12 months, but risks have increased.”
Investors are watching jobs and inflation reports closely, and Atlanta is also keeping an eye on the Fed’s GDP gauge, which adjusts regularly with incoming data and becomes more reliable as end-quarter data rolls in. goes. The tracker was looking for a 1.9% decline for the second quarter, but Friday’s data corrected that picture to a 1.2% decline.
While this is still what the US has traditionally regarded as recessionary, Atlanta Fed President Rafael Bostic told CNBC that branch economists see the economic picture as quite bright.
“The core of the US economy still looks very strong, and that’s what we should be paying attention to,” he told CNBC’s Steve Leizman during a “during one”.squawk box” Interview.
Bostic stressed the need to get inflation under control, but with regard to the GDPNow indicator, he said “there is much more than just a number can tell you.”
“Our focus is still very positive on where the economy is,” he said. “We’re concerned about inflation, and for me this is where our focus has really been over the last several months. … We’re going to try to keep inflation down while keeping the economy as strong as possible. “