The Jobs Report Shows Rising Unemployment. Are We in a Recession?
Today’s jobs report from the labor department showed the addition of 114,000 jobs to non-farm payrolls, much less than the 175,000 jobs forecasted by economists. The unemployment rate increased from 4.1% to 4.3%, while the number of unemployed people increased by 352,000 to 7.2 million.
This sharp uptick in the unemployment rate is significant. The Sahm Rule, which relates to signals identifying economic downturns, says that the economy has entered a recession when the three-month moving average of the national unemployment rate rises by at least 0.50 percentage points relative to its low during the last 12 months.
In other words, recession is here, at least according to these numbers.
However, many economists disagree that we can diagnose a recession based solely on this report–including Claudia Sahm, the former Fed economist who coined the Sahm Rule. Sahm, now chief economist at New Century Advisors, wrote in a blog post published last week:
“A recession is not imminent, even though the Sahm rule is close to triggering…The swing from labor shortages caused by the pandemic to a burst in immigration is magnifying the increase in the unemployment rate.”
What It Means for Job Seekers
Whether or not we’re in an official recession, times are tough for job seekers. The past few jobs reports have shown limited growth in only a few industries, typically healthcare, government, and construction.
Companies are continuing to perform mass layoffs. In the last week, Intel cut 15,000 workers. Layoff tracker Layoffs.fyi estimates that 384 tech companies have laid off 124,517 employees so far this year. Media, retail, and finance have also seen steep cuts to payrolls in the past few months.
In some ways, workers might be better off if we were in an official recession. That’s because states aren’t required to provide extended unemployment benefits until the unemployment rate is at least 5%. Without extended benefits, most workers will receive only 26 weeks of unemployment.
What Experts Are Saying
“...[W]ith the BLS’s ‘birth-and-death model’ still overstating employment from the net creation of new firms, we think the underlying pace of monthly job growth is likely less than 100,000—below the pace consistent with a steady unemployment rate. For those reasons, we expect the unemployment rate to rise to 4.5% by year-end.” -Michael Arnold, Bloomberg Economics Editor
“The labor market is now more vulnerable to a rapid weakening if there were to be an unexpected shock or if interest rates stay this high for much longer, noted Nancy Vanden Houten, Oxford Economics’ senior economist. …‘The [Federal Reserve] needs to guard against a scenario where a rising unemployment rate triggers a reinforcing negative cycle of unemployment, income loss, and additional job losses,’ she wrote in a labor market research briefing issued last week.” -CNN
“With wage growth abating, the labor market is playing along with the Federal Reserve's effort to slow inflation. If inflation goes back up, it won't be because of labor.” -Nela Richardson, Chief Economist, ADP
Just Give Me the Data, Please
The Employment Situation Summary by the numbers:
Total nonfarm employment: 114,000
Unemployment rate: 4.3%
Number of unemployed people: +352,000 to 7.2 million
Long-term unemployed: Unchanged at 1.5 million, up 1.2 million over the year
Labor force participation rate: 62.7%, flat for the month and the year
Employment-population ratio: 60.0%, little changed for the month, down by 0.4 percentage point for the year
People employed part-time for economic reasons: +346,000 to 4.6 million
Average hourly earnings: Up 8 cents (0.2%) to $35.07
Industries that added jobs:
Healthcare (+55,000 jobs)
Construction (+25,000 jobs)
Government (+17,000 jobs)
Transportation and warehousing (+14,000 jobs)
Social assistance (+9,000 jobs)
Industries that shed jobs:
Information (-20,000)
Industries that showed little change in employment:
Mining, quarrying, and oil and gas extraction
Manufacturing
Wholesale trade
Retail trade
Financial activities
Professional and business services
Leisure and hospitality
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