Things that have been weird recently: the Choco Taco, Batgirl, and any suggestion that we’re in a recession.
GDP data is suggesting the US is in a recession right how, however the same US also smashed expectations by adding 528,000 jobs last month, while the unemployment rate sank to 3.5%, matching a more than 50-year low.
And how about this milestone: Total employment in the US has now fully returned to its levels before the pandemic in February 2020. 22 million jobs were lost during the first two months of Covid, and now they’re all back.
The economy is weird, but it’s not in a recession
A jobs number this strong—the biggest employment gain since February—is pretty clear evidence that the US isn’t experiencing the “significant decline in economic activity” that the National Bureau of Economic Research defines as a recession.
But it is perplexing, since it comes at a time when other indicators are flashing warning signs:
- US GDP fell in Q1 and Q2 of this year. Two straight quarters of falling GDP has frequently been used as shorthand for a recession.
- One important measure of consumer sentiment fell to a record low in June.
- Many high-profile tech companies, including Meta, Microsoft, Netflix, and Robinhood, have laid off staff or hit the brakes on hiring in recent months.
Still, the booming jobs report shows that the tech industry’s problems might just be…the tech industry’s problems. Companies across virtually all sectors, from hospitality to manufacturing to professional services, hired at a rapid clip last month.
And they all lived happily ever aft—
If only. We haven’t yet talked about the economy’s final boss: inflation. And the folks who are fighting inflation (the Fed) probably didn’t love what they saw in the jobs report.
The Fed is deliberately trying to slow down jobs growth and salaries to pull back inflation from 40-year highs. But instead of a significant deceleration, more jobs were added and wages increased more than expected last month. That’s why the stock market didn’t light up like fireworks yesterday—the still-hot labor market means the Fed will have to continue hiking interest rates until jobs numbers and business activity start to chill out.
The good news is that the vast majority of Americans who want a job are employed, and that they’re making more money than last year. But in the fight against inflation, the good news is also the bad news.