The Story Behind the Government’s July Jobs Report

President Joe Biden celebrated the better-than-expected July jobs report on Friday, calling it “the result of my economic plan to build the economy from the bottom up and middle out.”  

Although the White House had initially anticipated a lower figure, the Biden administration and other Democrats in Washington celebrated the numbers.  

The headline print of 528,000 new jobs last month allowed the United States to return the 22 million positions that were lost during the coronavirus pandemic. But market analysts are digging through the data and finding new trends and fresh hurdles that the economy still needs to overcome.  

Are Workers Worried About a Recession?  

A July Insight Global survey found that almost 80 percent of U.S. workers fear losing their job in a recession, with 54 percent of respondents saying they would be willing to take a pay cut if it meant staying employed. 

Moreover, a June CNBC All-America Workforce Survey found that 83 percent of workers identified a recession as their top near-term concern. This was followed by wages not keeping pace with inflation. 

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A woman walks by a “Now Hiring” sign outside a store in Arlington, Va., on Aug. 16, 2021. (Olivier Douliery/AFP via Getty Images)

Recession fears have been paramount for the last several months. However, now that the United States has slipped into a technical recession—back-to-back negative GDP readings—workers might be trying to secure employment before the economic downturn amplifies, says Bryce Doty, the senior portfolio manager at Sit Investment Associates.

Although wages increased 5.2 percent year-over-year in July to above $32 per hour, the rate is still behind the 9.1 percent consumer price index (CPI). With broad-based inflation entrenched in the post-pandemic economy and recession fears seeping into the marketplace, workers might be looking at the millions of employment opportunities to ensure they can survive a slowdown.  

“And these job openings have been there for a long time. It’s not like the economy suddenly expanded and companies created new jobs,” Doty said in a note on Friday. “It feels more like people burned through pent-up savings and went, ‘Oh crap! I gotta get a job!'”

The personal savings rate has been on a downward trend this year, falling from 5.8 percent to 5.1 percent in June, data from the Bureau of Economic Analysis (BEA) highlighted. Moreover, consumer credit surged by $40.15 billion in June, up from the upwardly revised $23.79 billion in May. Credit growth has also soared by 10.5 percent year-over-year.  

According to the Bureau of Labor Statistics (BLS), job openings fell by 605,000 in June to 10.7 million—the lowest level since September 2021.  

Cody Harker, head of Data and Insights at Bayard Advertising, a recruitment market agency, told The Epoch Times that data show a notable increase in jobseeker traffic.  

“Job seekers, including those on the sidelines, may be looking to secure employment ahead of an economic slowdown; we’ve seen an increase in conversion rates from completed applications to hires by a staggering 24 percent over H1 of this year,” Harker stated. “This could also be influenced by the rise in employment among older workers, who are either re-entering the workforce out of necessity or pushing off retirement to stay afloat during a potential recession.”  

Recent BLS data show that approximately 1.5 million would-be retirees have headed back to the office. The labor force participation rate for people aged 55 to 64 has returned to its pre-pandemic level.  

Inflation and Productivity  

Another notable development in the job market has been the immense jump in people who have taken on multiple jobs. The total number of multiple jobholders surpassed 7.5 million in July, up from roughly 7 million the same time a year ago.  

Since the labor market cannot deliver the necessary wage gains to endure the current inflationary environment, employees are forced to accept lower pay, noted Peter Schiff, president and CEO of Euro Pacific Capital, in a recent interview with The Epoch Times.  

“How’s that a strong market?” Schiff asked. “A lot of people are being forced to take second jobs and third jobs because the job they have isn’t enough.”  

Doty echoed this sentiment in his commentary, noting that “to workers, this is a recession.”  

Labor productivity has also become a growing concern in this economy.  

Peter Boockvar, the chief investment officer at Bleakley Advisor Group, noted on Friday that when hiring is as strong as it is amid a contracting GDP, it must mean that productivity is being decimated.  

When output is sluggish and input is immense—unit labor costs advanced nearly 13 percent in the January-to-March period—it suggests that business costs are growing and the bottom line could be hurting. When this occurs, it can lead to layoffs, experts say. But if companies are desperate for talent, profit margins of the last year may help cushion the blows.  

This week, preliminary non-farm business sector labor productivity figures will be released, and experts are projecting a 4.6 percent decline in the second quarter. In the first quarter, productivity was down 7.3 percent, the largest drop in quarterly output since the third quarter of 1947. Hours worked jumped 5.4 percent, but output tumbled 2.3 percent.  

With a GDP becoming more dependent on productivity growth, this could be a significant challenge for the nation, warns Edward Chancellor, an investment strategist and author.   

“By aggressively pursuing an inflation target of 2 percent and constantly living in horror of even the mildest form of deflation, they not only gave us the ultra-low interest rates with their unintended consequences in terms of the ‘Everything Bubble’,” he recently told Mauldin Economics, “they also facilitated a misallocation of capital of epic proportions. They created an over-financialization of the economy and a rise in indebtedness. Putting all this together, they created and abetted an environment of low productivity growth.”  

Layoffs Across America  

The other aspect of the current labor market that has stumped economists is the growing number of layoffs and Americans filing for unemployment benefits.  

In the week ending July 30, initial jobless claims rose by 6,000 to 260,000, weekly Labor Department numbers revealed (pdf). Since April, the four-week average, which eliminates week-to-week volatility, has been climbing steadily.  

U.S.-based firms announced plans to cut nearly 26,000 jobs from their payrolls in July, up 36.3 percent year-over-year. This was the second-largest number of job cuts this year, according to Challenger, Gray and Christmas, Inc.  

In addition, data from Layoffs.fyi, which tracks companies terminating their employees, reported 16,104 new employees laid off last month.  

In recent months, many of the largest companies in the United States have trimmed their payrolls, including Netflix, Amazon, Walmart, Ford, and Peloton.  

The Fed is Watching  

While the headline reading might dismiss the plethora of concerns about the labor market, economists and market analysts are digesting the extensive information.

Whether this will eventually lead to a slowdown in jobs or not remains to be seen, but the Federal Reserve will be paying close attention.

If current labor conditions are withstanding the central bank’s tightening cycle, financial markets are indicating they believe they can afford the institution the opportunity to pull the trigger on a 100-basis-point rate hike at the September Federal Open Market Committee (FOMC) policy meeting.

From The Epoch Times