Financiers are nervous about the outlook for global growth. War, high inflation, and peaking elevated levels of government spending can do that to you. The worry about a potential recession shows up in many economic indicators, but in one place – the jobs market – evidence of pending economic calamity is lacking. Here’s a look.
The Total Employment Look
The first look is total U.S. employment. Current employment counts stand at 151,980,000. This is only about 500,000 jobs away from its prior peak reached in February 2020 of 152,463,000. If the economy generates the type of job growth it has in the past couple of months, and the jobs market will soon surpass its prior peak. It will have taken a long time, but finally there after 2 ½ years.
Wage Growth
The next look is of wage growth. June’s wage growth figure came in at 6.5% year-over-year growth. Although less than the inflation rate in most places across the U.S., wage growth of 6.5% is quite strong by historical measures. Excluding the pandemic-related wage gains, the last time the American labor market saw wage growth over 6% was in 1982 in the aftermath of the global inflation problems. Perhaps of a little concern, wage growth recently peaked at 6.7%, a turnover that always happens before the onset of any recession. Stayed tuned to this indicator!
The Unemployment Rate
The third look is of the U.S. unemployment rate. The unemployment rate currently stands at 3.6%, close to its all-time low. The 3.6% rate is also the farthest it has ever been from its 12-month moving average. The 12-month moving average currently sits at 4.2%. Times are ok for the American worker if the person is looking for a job.
Labor Force Participation Rate
The next view is of the labor force participation rate. Currently, the labor force participation rate sits at 62.2%, which is down from the pre-pandemic rate of 63.4% but above the pandemic low of 60.2%. Based solely on this view, the labor market has a sizable number of individuals sitting on the sidelines that could potentially join the labor force.
Employment Change by Sector
The last look is of employment change since the onset of the 2020 pandemic. The table is sorted by sectors that have had the biggest increase in employment since March 2020 to sectors that are still down in total employment counts. Interestingly, on top of the list is Trade transportation with net growth of 904,000, while the bottom of the table includes Leisure and hospitality, down 1,216,000 jobs.
Summing Up
Overall, although investors are right to be concerned about the economic outlook, labor market indicators are far from indicating a recession is imminent. If anything, the labor market is signaling more inflation problems on the horizon than lack of jobs. We’ll see how the remainder of 2022 plays out.
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