They are calling for a recession in order to “force” the Fed to pivot. But it’s hard to have an official stagnation with more employment and higher wages.
by Wolf Richter for Wolf Street.
It wasn’t the hottest job growth ever, but it was significant and exceeded the pre-pandemic average job growth. Employers added 528,000 workers to their payrolls in July, and 2.79 million over the past three months. Wages have jumped, but less than hyperinflation, and the number of unemployed actively looking for work has fallen to the lowest level since 2000, on the verge of the collapse of the Internet.
It was a terrible disappointment for the recession traders out there who want a recession more than anything else because, according to their reasoning, it will “force” the Fed to pivot and start cutting rates – Despite what the Fed is already saying – And the End this horrifying QT in a market addicted to QE and it will suffocate under the influence of QT. They want the Fed to reverse the tightening even though it has barely begun (too late), so that stocks will continue to balloon to the moon.
One day we will have a recession – and eventually there will be a recession. Dealing with this rampant inflation will likely require a slump, however a shallow slump may not be enough to get the job done as this inflation is getting entrenched.
But it is very difficult to have an official stagnation with this type of labor market, with employment and wages growing sharply, with unemployment falling.
The National Bureau of Economic Research (NBER) calls up recessions in the United States, the definition of NBER has been the same for decades, unchanged, and its definition includes labor market metrics, some of which we get today.
This strength in the payroll is backed by other data, such as the still-historically high number of job vacancies reported by employers for the month of June, as well as Massive crowding and commuting of workers who are very confident of work who are heading to better paying jobs, amid intense recruitment by employers to fill their positions.
Well, cash-burning startups are now worried about running out of cash to burn, as getting new fuel to burn is getting more and more difficult, and they are trying to lower their cash burn rates by reducing their paychecks. Among them are Robinhood and other former VIPs, some of whom have become heroes in my country exploding stocks Column that lost a lot of money while in existence. But this is a tiny – and very crazy – corner of the job market, and the numbers of layoffs are minuscule compared to the job market in general.
Inclusive, Layoffs and layoffs in June and previous months were at historic lows. There is still a significant shortage of staff in the healthcare system, school systems, airlines, and many other industries.
So the total number of workers in non-farm payrolls rose by 528,000 in July to 152.54 million workers, a new record, finally overcoming and for the first time at the highest level before the pandemic, according to a Bureau of Labor Statistics survey of facilities today. This number of payroll workers continues to keep pace with the pre-pandemic trend (green line):
Workers, including self-employed and entrepreneurs.
Households reported that the number of people with jobs, including the self-employed and businessmen not recorded in the above employer data, rose by 179,000 in July, and by 185,000 over the past three months to 158.3 million.
Interestingly, the number of people on employers’ payroll is rising sharply, while households report a much smaller increase in the number of employed people, including the self-employed and entrepreneurs. This may be in part because self-employed people are returning to regular work with a company, with employers reporting gains, but for families, the person has just transitioned from self-employment to working on company payroll. And that would make sense amid aggressive hiring by employers.
The number of unemployed is the lowest since dotcom.
The number of unemployed people actively looking for work fell by 242 thousand to 5.67 million, down from the lowest level before the pandemic, and marking the lowest level since 2000.
The workforce is stuck.
The workforce – people who work or actively look for work – fell by 63 thousand in July, the second consecutive month of declines, to 163.9 million, where it was mainly in February.
There has been a lot of thinking about why the workforce has faltered. All kinds of rationales that work together are cited: the difficulty and cost of finding a nursery; the need to take care of elderly relatives; excess mortality rate since 2020; Health problems associated with the Covid virus. a massive wave of “retirement” by people who already have enough thanks to the massive inflation of asset prices; As I put it, age segregation, 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 technology), and when they stop looking for work, they are out of the workforce. And the list of reasons goes on.
Many people, including the Fed, are now suggesting that the old, normal workforce may never return, and that there are permanent changes in the labor market that we are only now trying to discover.
Non-managers’ wages have risen, but are still outpaced by hyperinflation.
Average hourly earnings change management Workers Programmers, waiters, teachers, police officers, engineers, construction workers, etc. jumped 0.4% in July from June, and 6.2% from a year ago to $27.45 an hour. This was the tenth annual increase of more than 6% in a row.
These annual increases of more than 6% – other than distortions in 2020 – were the largest since early 1982. But they are still outpaced by hyperinflation, with CPI inflated by more than 9%.
Population Employment Ratiowhich tracks the percentage of working-age people, which is at 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 a faltering workforce.
Unemployment rate, At its narrowest definition – the percentage of people who are in the workforce but not working – it’s down to 3.5%, where it was before the pandemic. If the labor market weakens, this rate will rise, as it has every time before. But she is still down to earth.
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