US Labor Market Exceeds Expectations Despite Warning Signs of Recession
The Labor Department reported much better-than-expected job growth in July while the unemployment rate dropped to 3.5%, the lowest level in nearly 50 years.
The U.S. economy has now recouped the 22 million jobs lost early in the pandemic, adding 528,000 positions in July (economists had expected only 260,000) as employers clamored for workers despite a slowdown in economic growth, reports The Wall Street Journal.
Excerpt from The Wall Street Journal: The jobs recovery took nearly 2½ years and included a stretch in the first half of the year during which payrolls grew faster than during any other post-World War II period when the economy began contracting. The unemployment rate dropped to 3.5%, a half-century low also seen just before the pandemic in early 2020, the Labor Department said Friday. Job gains were widespread. Employers in leisure and hospitality added jobs at a solid clip, as restaurants and bars continued to recover. Payrolls also grew in healthcare and professional and business services, which includes many white-collar jobs. Industries vulnerable to the Federal Reserve’s interest-rate increases also performed well in July. Construction firms, manufacturers and finance companies all added to payrolls.
In a related article, also from The Wall Street Journal, the disconnect between the growing job market and otherwise faltering economy boils down to one key point: Despite slowing consumer demand, the supply of workers to make goods and provide services has been considerably below companies’ needs.
"Labor demand is strong enough that workers who are losing their jobs are likely to find new ones much faster than in a typical downturn," said Bill Adams, chief economist at Comerica Bank. "That will largely interrupt the vicious cycle of a recession where job losses trigger cutbacks in consumer spending and less revenue for businesses, which forces additional layoffs."
Excerpt from The Wall Street Journal: Employers in many cases haven’t been able to find nearly enough employees following job cuts during the short, deep recession of early 2020. Others that have returned to pre-pandemic employment levels are hesitant to lay off workers, given the difficulty they have experienced rehiring after pandemic shutdowns. The unusual labor-market dynamic puts the U.S. economy in a stronger position to weather a downturn than in the past, according to some economists. In recessions, companies are typically slow to lay off as demand declines, but layoffs typically pick up sharply once that cycle gets going. In the past seven decades, U.S. recessions have always been accompanied by a rise in the unemployment rate, with a median increase among post-World War II recessions of 3.5 percentage points.
In another related story from Car & Driver, AAA says the national average is currently $4.19 per gallon, and it's $3.77 or less in eight states.
"We know that most American drivers have made significant changes in their driving habits to cope with high gas prices," said AAA spokesperson Andrew Gross. "But with gas below $4 a gallon at nearly half of the gas stations around the country, it’s possible that gas demand could rise."
Excerpt from Car & Driver: Gas prices have been extremely volatile this year, with the national average peaking above $5 per gallon in June. However, prices have now fallen for the past seven weeks straight. President Joe Biden today tweeted that the current drop in gas prices is the fastest decline the country has seen in over a decade. The highest recorded average price of a gallon of regular was $5.02 in mid-June, per AAA, which today lists the national average at $4.19 per gallon. That's a difference of 83 cents. AAA yesterday issued a report on the falling gas prices, including a chart that compares national gas prices between 2019 and 2022. It also pointed out that these lower prices could lead to increased demand, which could stymie the price drop.