Actions speak louder than words. People say they’re concerned about a recession yet employers keep hiring in droves. Over the past three months, employers have added an average of 437,000 jobs a month with an unemployment rate that just hit 3.5%. That’s a remarkable indication of a tight labor market with exceptionally strong demand for workers. We hear chatter about a recession, but see no signs of that in the labor market data.
Headlines about increased layoffs have been constantly in the news in recent weeks, but the data from July continue to show depressed rates of job loss. About 1% of employed workers moved into unemployment over the month, which is barely above its June rate. At the same time, unemployed workers are finding new jobs at an elevated rate. There might be a bit more churn in the labor market, but unemployment remains very low.
Payroll employment continues to be very strong with leisure and hospitality leading the way once again. The sector is still down about 7% from its February 2020 level, but it continues to make progress. Information, the sector that contains technology companies, added jobs in July belying concerns that this sector is being hit very hard at the moment. Payroll gains are not only strong, but strong across the board.
Underestimate the US labor market at your own peril. Yes, output growth might be slowing and the economic outlook has some clouds on the horizon. But employers are still champing at the bit to hire more workers. That demand may fade, but it’s still red hot right now.