The job market has now recovered far beyond its pandemic damage, creating confidence that a red-hot labor market may remain, even as other parts of the economy turn sour. . The momentum has given workers historic wage benefits and the chance to get more leverage in their jobs.
The July jobs report shattered a record 19-month gains, marking a major political victory for President Biden and Democrats to head out this fall. Growing discontent about the economy has affected Biden’s popularity, especially from within the Democratic Party. However, job growth remains a bright spot for Biden’s presidency so far, with the economy averaging more than half a million jobs each month.
“Today, the unemployment rate is the lowest in more than 50 years: 3.5 percent,” President Biden said in a statement Friday. “There are more people working than at any point in American history. This is the result of my economic plan to build an economy from bottom to top and middle to out.”
Republicans are quick to criticize Democrats about inflation in the economy, but fewer GOP lawmakers commented on the jobs numbers Friday.
Kevin Brady, R-Texas said, “Thanks to Republican governors who remove the Joe Biden work barrier that pays the unemployed more to stay home than to work, July’s jobs report is finally up to expectations.” Came true.” “The labor force participation rate still hasn’t improved in 2021, which is a red flag for further slow growth.”
As a pioneer in the path of leisure and hospitality with 96,000 jobs added, a large number of jobs were seen across a broad spectrum of categories. demand for Consumer services remain strong All summer long, despite high prices on groceries, gasoline and other basic necessities.
In addition, professional and vocational services added 89,000 jobs, with gains in architectural and engineering services, technical consulting and scientific research and development. Health care took up 70,000 jobs, primarily in health care services and hospitals and nursing facilities. Jobs grew in government, construction, construction and even mining.
“This report is a great sign for the labor market,” said Julia Pollack, labor economist at ZipRecruiter. “There are many indications that inflation is coming down. Gas prices are coming down. Inventory levels are rising. It looks like we can manage to get inflation under control without stalling the job market recovery. There is reason to think the labor market could weather the storm.”
Even the June jobs report was raised from 372,000 to 398,000, indicating a continued pace of job growth this summer.
The July jobs report showed no signs of slowing down, proving to be a pillar of strength for an economy facing strong winds. other indicators, in particular inflation at the highest level of 40 years and Six months of negative economic growth Paint a less pink picture. Financial markets have lost trillions of dollars in value this year, and a measure of that consumer sentiment In June, it reached a record low.
Economists worry that as the Fed continues to raise rates, and borrowing becomes more expensive for households and companies, workers may have less leverage in the job market than they did earlier this year. At the same time, economists fear that higher interest rates could trigger a wave of layoffs.
The Dow Jones Industrial Average fell 200 points on Friday as a Stellar Jobs report could give the Federal Reserve more reason to raise interest rates more quickly.
But the economy is showing signs that the labor market may remain strong and recover even as the Fed raises interest rates to combat inflation.
“This is a strong report,” said Labor Secretary Marty Walsh. “If we look at the day before Biden took office, 10 million people were out of work. All those jobs have been taken back. Even more so some sectors. Right now we have a ‘recession,’ but we It has to be focused that what we are living in financially is very different from what we have experienced in the past.”
Wage growth, while stronger than the Fed would like to see, has not kept up with inflation. The lowest-income families continue to struggle to put food on the table and pay for gas and housing. Average hourly earnings rose 0.5 percent this month to $32.27 per hour, continuing the upward trend since the beginning of this year.
“The most important point in this report is that we haven’t seen the expected reduction in wage growth,” said Karen Dinan, a Harvard University economist and former chief economist for the Treasury Department. “To be clear, strong wage growth benefits workers in the short term. But the current pace of wage growth is not in line with low inflation in the long run.
Declining workforce participation is another area of concern for economists. In July, participation fell from 62.2 percent to 62.1 percent, raising concerns that some workers are still unable to join the workforce.
“Some of the benefits of job creation are not being realized because people are unable to go to work,” said Nick Bunker, director of economic research at Indias Hiring Lab. “It could be a lack of child care and Covid, people getting sick with Covid – and the long-term effects of Covid.”
Most private sector workers are seeing wage growth wiped out by inflation, and a record number of Americans have taken the job. two full time jobs, Government employees, whose wages are less than the rest of the workforce, are Suffering Even more so than the increased prices of gas, food and housing.
The number of Americans leaving their jobs remains high, though lower than their peak earlier this year. A record number of workers have left their jobs in the past year, in what is known as the “Great Resignation”, as a hot labor market battered by the pandemic has workers in leverage to demand higher wages and better conditions. increased, particularly in the leisure and hospitality sectors. While the data shows that this trend is also softening, the dropout rate remains at a 20 year high.
Elena Geffrard, a case manager in Developmental Human Services, recently put her notice to her employer in New York because she found a better-paying job doing the same job elsewhere with a lighter caseload.
“I’m leaving because I’ve been wiped out, and they gave us more cases to take care of,” Geffrard said. “I have 40 cases to monitor. In my new job, I am getting more salary and I have only 20 cases.”
Geffrard said finding a new job was not easy. He had applied for about 40 in the past one year before he got his offer last week.
job vacancies slow Retail and wholesale trade declined significantly in June compared to the previous months, as consumer demand shifted away from goods to services such as eating out, going to the movies and travel.
Reported layoffs in June held steady despite rising media report of job loss in the tech, advertising and health care sectors. In June, the information sector, which includes technology, increased its layoff rate from 0.9 percent to 1.3 percent. Netflix, Masterclass and Coinbase cut hundreds of employees in June. However, most employers seem to be holding on to their employees. Also, employees who lose their jobs are quickly looking for new positions.
“There is no doubt that some employers have come out of a time when labor markets were unusually tight, so they may be reluctant to lay off people as they would have before this period of labor shortage, said Erica Groshen, an economics consultant. Cornell University and commissioner of the Bureau of Labor Statistics from 2013 to 2017.
Geneva Tucker, a research analyst in Kansas City, Kan., was laid off in May because of budget cuts by the Kansas Department of Health and Environment. Tucker has since applied for nearly 200 research jobs with no luck.
“Initially I was looking for similar work, but it was not an easy process,” said Tucker, who holds a degree in microbiology. “At this point, I’m just trying to apply for any job that is relevant to my experience that can pay a decent amount.”
Out of work for two months, he is now receiving unemployment benefits and is barely being fired. He has also reduced staple groceries.
“It’s a real struggle to make ends meet,” Tucker said. “When gas is $5 a gallon, it’s really hard to drive to a job interview because I can’t afford gas. It feels so unfair to have all this experience and my degree and get to this point, Where I am struggling day by day.”
Roaring job growth could be an encouraging sign that the Federal Reserve hasn’t gone far enough in cooling the economy, and that they may be able to slow the economy without spelling disaster for the labor market.
To control the highest inflation in 40 years, the Fed has raised interest rates four times this year, including two back-to-back hikes of three-quarters of a percentage point. Fed leaders regularly say they will keep raising rates until they see clear and convincing evidence, through months of data, that inflation is changing. The risk, however, is that they move so aggressively that businesses stifle hiring or issue widespread layoffs that lead to increased unemployment.
Yet the latest gangbuster job data seemed to allay those fears, at least for now.
Skanda Amarnath, executive director of left-wing Employee America, said: “The Fed will have to worry less that their actions are leading to a sharp slowdown and a possible slowdown.” “But ultimately, it is the inflation data on the next two prints ahead of the September policy meeting.”
The Fed decides not to hike rates in August, and it’s too soon to know how far Fed officials will go at their next policy meeting in September. Just last week, Fed Chairman Jerome H. Powell noted that more data will come to shape officials’ understanding of the economy.
Betsy Stevenson, an economist at the University of Michigan and a member of the Council of Economic Advisors during the Obama administration, said it would be a mistake to assume that the only way for the Fed to cool down the economy is to stop employers from hiring. The overall jobs report underscored that the labor market is still exceptionally tight, Stevenson said, and raised hopes that the Fed could engineer a kind of “soft landing” that avoids a painful recession or high unemployment. .
Still, the jobs report showed more evidence of wage increases – which is not a sign of an economic slowdown. Economists are keeping a close eye out for any markers of what is known as a wage-price spiral, where higher prices drive away higher wages in a volatile cycle that causes even more persistent inflation.
“Are employers fighting over a pool of workers, and the fight is pushing them to raise wages?” Stevenson said. “One of the reasons I feel optimistic is that they were able to hire 528,000 people, and that means the pool continues to expand… it would be even worse if we were to see those wage increases and We weren’t seeing job growth. It’s subtle, but very important.”