You can put away your recession alarm bells. The US labor market is still very strong. Job growth continues to be robust and joblessness remains low. Yes, job growth has slowed from its torrid pace earlier this year. And yes, some indicators show a contraction in employment in June. But the overwhelming signal is that the labor market continues to power forward. Wage growth remains elevated and rates of job loss are low. We’ll see another recession some day, but today is not that day.
Over the past three months, private sector employers have added an average of 362,000 jobs a month. That’s well above the number needed to keep the unemployment rate steady, which is closer to 75,000 to 100,000 a month. Payroll growth would have to slow quite a bit more to even approach that rate. Underneath the hood of that number shows continued gains for the leisure and hospitality sector. That’s a good signal of progress for a sector that’s still down 7.8% from its pre-pandemic employment.
When it comes to wage growth, rumors of its decline have been greatly exaggerated. The latest data suggest that wage growth for production workers is leveling off close to 6% and not dropping substantially. Workers are no longer seeing accelerating wages, which should reduce concerns about a wage-price spiral. But with inflation still high, workers are unlikely to see further gains in inflation-adjusted wages.
The employment-to-population ratio declined in June, but hopefully that is an aberration. The survey that underlies this statistic is more volatile than the payroll survey. However, there are positive signs from that part of the report, as the rate of employed people moving into the ranks of the unemployed ticked down and involuntary part-time work dropped as well.
The labor market still has momentum. If you’re looking at this report for signs we’re already in a recession, you’re likely to come up blank. That’s not to say that this report is flawless or that no threats loom for the labor market. For now, employers continue to hire a considerable number of workers at higher wages. That’s something to celebrate.
