On Friday, the Bureau of Labor Statistics released a surprising jobs report. Over half a million jobs were created in July.
Cue the rosy headlines:
- CNN: Massive jobs surprise: US economy added 528,000 jobs in July
- CNBC: Payrolls increased 528,000 in July, much better than expected in a sign of strength for jobs market
- Washington Post: Employers added 528,000 jobs in July, shattering expectations
According to this oft-cited government report, total nonfarm payroll employment rose by 528,000. This was the largest monthly job increase since February and it was roughly double the pace of new hiring that economists had expected.
As a result of this seeming hiring spree, the headline unemployment rate which has been stuck at 3.6% declined to 3.5%.
For women, the picture seemed to improve as well. The women’s unemployment rate fell from 3.6 to 3.4% and 215,000 women joined the labor force.
Half a million more people collecting a paycheck is a welcomed development. But if you’re like me, something just did not seem right about the numbers.
First, the discrepancy between BLS data sources is a pretty big chasm. The establishment survey, which measures numbers added to the payrolls, registered the reported 528,000, but the Household survey, which provides demographic data and the unemployment rate, only registered 179,000 new workers.
Then, there’s the issue of the rising number of workers holding down multiple jobs–up by 92,000 (from 7,541,000 to 7,633,000). Having side hustles could be a good thing if one is choosing to work on her dreams. Not if 40-year-high inflation has made life on one income unaffordable.
That’s why in my initial statement in response to this job report I concluded,
The wrong solution is to dial up inflation by passing a massive tax-and-spend bill, but that is what the Democrats mislabeled Inflation Reduction Act does.
In addition, another 239,000 workers left the labor force altogether last month and the share of adults working or seeking a job (aka labor-force participation rate) fell to 62.1% from 62.2% a month earlier. Taking a celebratory tone over workforce dropouts is cruel. Just as cruel is ignoring the reports of job cuts surging among U.S. employers and hiring freezes and layoffs picking up in the tech industry.
Even if the jobs numbers are accurate, negative economic data whip at us like wind gusts that precede a harsh summer storm:
- A whopping 2.2 million people were unable to work because their employers closed or lost business due to the pandemic.
- Weekly initial claims for unemployment benefits crept up for three consecutive months–even as job openings have fallen.
- Over 3 million fewer people are working today than prior to the pandemic.
- U.S. household debt hit a record $16 trillion due to rising mortgage balances along with credit and auto loan debt.
- Credit card debt is surging as consumers try to offset inflation on groceries and gas with plastic.
- Consumer sentiment hovers at record lows.
The sky is growing darker and darker as billowing clouds eclipse the sun. Something is amiss even if the weather app says the current forecast is partly sunny.
Some argue that two consecutive quarters of negative growth no longer define a recession, especially with strong job growth. But there are too many headwinds driven by inflation to deny that an economic tempest is battering American households right now.