Someone neglected to inform the employment market whether the US economy is in recession.
In contrast to an economy that is experiencing a slump, the employment situation during the past six months has been rapidly adding jobs at a rate of around 460,000 each month.
According to Steve Liesman’s research for CNBC, in a typical downturn, the employment picture would be far grimmer and would show a loss rather than a gain. The “Squawk Box” on Wednesday featured a number of charts that aid in illuminating the situation.
The CNBC team examined economic information going as far back as 1947. It stated that payrolls decline on average by 0.5 percentage points when the gross domestic product has been negative for six consecutive months, as it would be in 2022. But this year, the number of jobs has actually climbed by 1%.
That assumption is supported by internal data from the human resources software provider UKG, which demonstrates that the number of new employment has roughly tracked the BLS total.
Last but not least, the Dallas Federal Reserve revealed in study published on Tuesday that it discovered “that most indicators — particularly those measuring labor markets — provide strong evidence that the U.S. economy did not fall into a recession in the first quarter” of the year.
The researchers at the central bank examined real personal consumption expenditures as one type of data. In general, they discovered, consumption falls off during economic downturns. On the other hand, the measurement went up in the first half of 2022.
Many observers have concentrated on the conventional definition of a recession as two consecutive quarters of negative GDP growth, despite overwhelming evidence to the contrary. This requirement was met by the first quarter’s fall of 1.6 percent and the second quarter’s decline of 0.9 percent.
The fact that the economy expanded well on a nominal basis during the second quarter while real GDP falling in inflation-adjusted terms is another peculiar aspect of the current situation. The period had an increase in nominal GDP of 7.8%, although this was overshadowed by a quarterly inflation rate of 8.6%.
In comparison, during the most recent recession in 2020, real GDP fell by 5.1 percent and nominal GDP shrank by 3.9 percent and 32.4 percent, respectively, in the first and second quarters.
James Bullard, president of the St. Louis Fed, said to CNBC on the “Squawk Box” programme that he does not believe that the economy is in a recession, but he was more alarmed by the decrease in the second quarter.
“The first-quarter slowdown, I think, … was probably a fluke, but the second quarter was more concerning,” he said. Even if the economy slows in some rate-sensitive areas, “that doesn’t by itself mean you’re in recession just because you see some negative signs in some parts of the economy.”
The BLS is likely to publish a payrolls rise of approximately 258,000 for July, according to Dow Jones projections, when the most recent statistics on the employment situation is released on Friday. According to BLS data released earlier this week, there is still a sizable discrepancy between the number of unfilled positions and the pool of qualified applicants.