US Labor Market

EMEL AKAN is a senior reporter for The Epoch Times in Washington. Previously, she worked in the financial sector as an investment banker at JPMorgan. Emel Akan

Can the Job Market Weather Economic Gloom?

A deeper dive into the jobs data reveals weaknesses in the labor market

The u.s. economy added a surprisingly strong 372,000 jobs in June. Many concluded that predictions of a recession were greatly exaggerated after seeing the red-hot jobs report.

But despite the solid employment recovery, some observers are skeptical of the idea that the jobs market is as healthy as the government portrays.

The main concern is that the Federal Reserve may be too quick to judge that the labor market has healed enough to warrant an aggressive tightening in monetary policy, which could lead to severe job losses.

With many big and small businesses cutting their payrolls, the labor market is already showing signs of cooling. Job cuts announced by U.S.-based employers totaled 32,517 last month, up by 57 percent from May, according to a report from global outplacement consultancy Challenger, Gray & Christmas.

The June jobs report shows that the private sector has recovered all the jobs that were lost during the COVID-19 pandemic recession, but the public sector is still down by 664,000 from February 2020 levels. And a deeper dive into the payroll data also reveals disparities and weaknesses in the recovery.

Even as 2.7 million jobs were added in the first half of 2022 and the unemployment rate fell back to historically low levels, labor force participation has remained depressed.

The labor force participation rate, which shows the share of the population that’s working or looking for work, was 62.2 percent in June—the same as it was in January—and remains 1.2 percentage points lower than the pre-pandemic level of 63.4 percent.

This trend is concerning for the longterm health of the economy, according to E.J. Antoni, a research fellow at The Heritage Foundation.

The decline in labor force participation has been driven by several factors, including early retirement among baby boomers.

As a result, the current jobless rate gives “a very skewed perspective” of the true state of the labor market, Antoni said. If the U.S. economy had the same labor force participation trend it did before the pandemic, the unemployment rate would currently be roughly at 5 percent, he said.

While 5 percent isn’t very high, he noted that it’s comparable to the levels seen in 2008. Hence, the U.S. jobs market may not be that much different from when it entered the Great Recession of 2008.

“Our private sector has now recovered all the jobs lost during the pandemic and added jobs on top of that,” President Joe Biden said in a July 8 speech, touting June’s employment report.

However, private sector employees now work almost half an hour less each week than they did in January 2021, when Biden took office.

A half-hour every week doesn’t seem like much, according to Antoni. However, considering the overall number of man-hours in a year and the number of people working in the private sector, it equates to a need to hire more people.

According to his calculation based on 130 million private sector employees, this equates to almost 2 million jobs.

“Even though you have more people working, the total amount of work being done is not actually any greater,” Antoni said.

In addition, the June jobs report reveals a widening gap between surveys of households and establishments (businesses), which alarms some economists. The establishment survey shows 1.1 million jobs gained since March, but the household survey shows a loss of 347,000.

Another interesting finding from the household survey is that the number of Americans working multiple jobs climbed by 239,000 in June. Since many Americans are unable to make ends meet, they must work several jobs, and this is only captured by the household survey.

One implication of this is the possibility of double counting of employed people in the establishment survey, Antoni said.

There have been growing fears of a recession in recent months, as economic indicators have begun to point to a slowdown. The July jobs report, which will be released on Aug. 5, will be a key indicator of whether those fears are founded. If job growth slows significantly, it might be another indication that the economy is already in recession.

Even as 2.7 million jobs were added in the first half of 2022 and the unemployment rate fell back to historically low levels, labor force participation has remained depressed.