The strength of May’s employment numbers surprised many experts, with nonfarm payrolls adding 390,000 workers.
The June report is due July 8, and economists expect a deceleration to a gain of about 270,000, according to a Bloomberg survey.
That would represent one of the smallest increases during the economic recovery that began in May 2020. But it’s well above the trend of the 10 years prior to the covid pandemic, which began in March 2020.
A number close to the consensus would constitute “more of a natural slowdown than a slack in the economy,” Brett Ryan, senior U.S. economist at Deutsche Bank, told Bloomberg.
Signs of StrengthBy most measurements, the labor market remains strong. Job openings totaled 11.3 million as of May 31, while hires registered 6.5 million in the month.
“This is not what a recession looks like,” Nick Bunker, an economist at job information service Indeed, told The Washington Post. “Demand for workers might be stagnating, but it’s still at very elevated levels. The labor market is not signaling a recession.”
Also, average hourly earnings soared 5.2% in the 12 months through May. To be sure, they ticked up only 0.3% from April, which translates to a 4.3% annualized rate.
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Also, a June survey published by Insight Global showed that 78% of U.S. workers are worried about their job security in the next recession. And economists see a high chance of recession coming soon, as the Federal Reserve lifts interest rates to quell inflation.
Recession ChancesA survey conducted by the Financial Times found that 70% of economists believe a recession will begin in 2023.
Harvard economist Larry Summers has noted that in the past 65 years, every time inflation has exceeded 4% and unemployment has been under 5%, a recession has followed within the next two years.
Consumer prices soared 8.6% in the 12 months through May, and unemployment registered 3.6% that month.
Getting back to the survey of workers, it found that inflation, too, is a major concern for them, with 42% equally worried about the impact of a recession and inflation.
Price increases have exceeded the pace of wage increases, so workers have less buying power than they did a year ago. And a recession would obviously put downward pressure on hiring and wages.
Meanwhile, some major companies, including Netflix (NFLX) – Get Netflix Inc. Report and Tesla (TSLA) – Get Tesla Inc. Report, have announced job cuts. So while the labor market is strong now, trouble may lie ahead.