- A negative GDP reading last week exacerbated recession fears, but other indicators remain solid.
- Labor market data reveals that companies are still rapidly hiring and retaining workers.
- The financial conditions of families in general are in good shape, and Americans continue to spend large sums.
Last week’s GDP report painted a bleak picture of the economy – but more indicators show the country is doing well.
anyway gRussia shrinks GDP For two consecutive quarters, inflation has been At its highest level in four decadesand the economic sentiments of Americans Close to record lowsIt would be a mistake to ignore the many signs of resilience in the US economy. A handful of indicators — including those tracked by the National Bureau of Economic Research, the same organization that advocates for recessions — show the recovery proceeding strongly during the second quarter, albeit at a slower pace than last year.
Consecutive quarters of negative growth are the primary criteria for a technical slump, but the NBER actually decides when downturns begin, and its criteria are much stricter. NBER . Dating Committee known economic recession as “a marked decline in economic activity that is spread throughout the economy and lasts more than a few months.”
It also looks at a few variables that give a more comprehensive overview of the economy than GDP, and these indicators are all in a healthy area.
4 signs that companies are hiring quickly and keeping workers
Almost every measure of the labor market shows that it is in strong shape.
Nonfarm payrolls – the most popular measure of total employment – are the latest indicator to flash an encouraging sign. United State Added 528,000 jobs in Julydoubling average expectations and expanding the historically robust payroll build seen throughout 2022.
profit Puts total jobs above the pre-epidemic high, suggesting a full recovery from the losses seen early in the pandemic. This recovery occurred almost three times faster than the recovery from the Great Recession, although the coronavirus recession saw the largest drop in employment after the war.
Unemployment remains historically low as well. The measure fell to 3.5% in July, matching the five-decade low that was before the pandemic.
The unemployment rate is influenced to some extent by the fact that labor force participation is still weak. The scale only tracks unemployed Americans who are actively looking for work, which means those outside the labor force are not counted. As participation improves, unemployment rates can rise until new job seekers find work.
However, the low rate confirms the existence of an unusual tightness in the labor market.
Much of this narrowing comes from the huge gap between the demand for labor and the supply of workers. Jobs chances It fell to 10.7 million in June of 11.3 million, in a hint that the labor shortage could ease. However, the ratio of available workers to vacancies was 0.6, which means that there were approximately two opportunities for each job seeker. Companies are not just hiring, they are in dire need of workers.
Companies largely retain the employees they already have as well. Unemployment claims The number rose to 260,000 in the week that ended July 30. The print extends the slow crawl to the top that began in April, yet the claims are only slightly above the pre-pandemic average. The upward trend is likely to reflect layoffs in the technology and construction sectors, which rose at the start of the summer. However, other industries are still showing fairly normal layoffs, indicating that companies have not yet cut back their workforce in preparation for the economic downturn.
3 of the top recessionary judges metrics are shown in green
Americans’ finances are holding up well even with high inflation. Real Income Less Conversions — which tracks inflation-adjusted income without government support such as stimulus controls and Social Security — is also well above pre-pandemic levels and heading higher, albeit at a slower pace. The gains reflect that despite rising prices and waning incentives, households still own more wealth than they did before the pandemic recession began.
Americans spend a lot of money, too. Real PCE, or inflation-adjusted spending, rose dramatically early in the pandemic as households received stimulus payments and shop online through lockdowns. Inflation dampened the rally a bit, but spending remains historically high as households pump more fuel into the economic engine.
Industrial production It is also still rising, indicating that companies have not yet slowed production in anticipation of an economic downturn. The metric showed the second-best recovery of the four major metrics tracked by NBER, and with supply chains recovering and inventory rebounding, production is likely to improve further.
Two surveys of managers show strength in private sector business
And the power metrics among private companies are holding up. The Institute for Supply Management’s Purchasing Managers’ Indexes — which track activity of manufacturers and service firms compared to the previous month — indicate the industry is expanding.
While growth has slowed in recent months, manufacturers have just achieved a 26 consecutive month of growth. Inventories rebounded faster during the month as supply chains recovered and business orders offset last year’s build. Companies continued hiring at a healthy clip, and there were few signs of layoffs or staff freezes.
Some managers surveyed cited concerns about potential weakness in the economy, but sentiment remained generally upbeat as demand remained strong, Timothy Fury, chair of the ISM Manufacturing Business Survey Committee, said in a report Monday.
Services also rebounded during July, thanks to significant gains in new orders, business activity and inventory sentiment. Supplier deliveries have improved significantly, indicating that the economy is close to balancing supply and demand.
Oren Klashkin, chief US economist at Oxford Economics, said in a note that the service industry’s actions “provide encouraging news about the state of the economy at the start of the second half”.
“Obviously the best days of recovery are in the back-mirror, but that doesn’t mean the downturn has begun,” he added.