Job Market Strong Even as Other Indicators Signal Recession

The June Employment Situation

July 9, 2022 by Tim Hatton, Echo Liu

US employers added 372,000 jobs in June, ahead of economist predictions and defying expectations that recession fears would lead employers to scale back. However, the labor force participation rate inched down, offering no relief for those concerned about a worker shortage and a tight job market. 

Because of inflation and other concerns about the world economy, many had predicted a drawback in the number of jobs added—many experts estimated the number would fall between 250,000-275,000. Instead, the Bureau of Labor Statistics’ monthly Employment Situation report showed that growth included 100,000 more jobs than predicted. After revisions to the jobs numbers for April and May, the past three months have shown consistent gains, averaging over 374,000 jobs each month.

This morning, Lightcast Senior Economists Ron Hetrick and Rucha Vankudre discussed their first reactions and initial analysis from today’s report, and you can catch up on their live stream on LinkedIn. This was their first live discussion since Emsi Burning Glass rebranded as Lightcast.

One of their main takeaways was the disconnect between concerns about the broader economy and strength in the job market regardless.

“For anyone who grew up in the last 30 to 40 years, we’re used to downturns in the economy being accompanied by layoffs. But, that’s simply not true anymore because we were never able to hire up as our economy was trying to overheat,” Hetrick said. “You can’t lay off what you were never able to hire.”

This report also showed that new job postings continue to outpace the change in employment. The BLS JOLTS report showed a similar pattern earlier this week, showing that job openings had slightly declined—still over 11 million—but that hiring had drawn down. This indicates that employers aren’t filling their job openings, instead just taking them down unfilled. 

The June Employment Situation showed that hourly earnings increased by 10 cents per hour, an increase of 5.1% over the past twelve months. That’s lower than the 13-cent increase reported in May, but still a significant jump amid concerns of rising inflation. 

Another cause for concern was the drop in labor force participation—while the actual participation rate held steady at 62.2%, the civilian labor force declined by 353,000 compared to May, and most demographics saw a slight decline in their participation rate. This shows that individuals who had sat out the job market are not rejoining it in any significant number despite widespread price increases.

One trend that stood out in today’s report was the number of people reporting they were unable to work because of pandemic concerns. This is a relatively small uptick—up to 2.1 million, from 1.8 million last month—but it shows that concerns about Covid-19 have not fully disappeared from the labor market. 

Though some of the individual patterns shown in today’s report—including high wage growth, stagnating labor force participation, and an increased pandemic impact— indicate potential concern about the economy’s direction, any concerns about a coming recession are not reflected in the data. Jobs growth has been strong and consistent. If a recession does come, it seems less and likely that it will be reflected in the job market. 

That also means that tight labor market conditions will continue and competition will be tight for employers looking to hire, particularly with unemployment consistently low. 

“Workers still have some control because there aren’t enough bodies to go around,” Vankudre said during our live broadcast. “It’s not clear anything is going to change in the labor market anytime soon.”