Job Market’s Off-Month Is No Big Deal

So we finally had a month in the job market that was a letdown. How ‘bout that?

July Job Market Performance

By all accounts – and to most analysts’ and observers’ ways of thinking – 114,000 new jobs and an uptick in the unemployment rate to 4.3% is a poor performance. I’m not willing to go that far. Although I, too, am disappointed, I’m not about to pop my lid. And those who are, need to cool off.

Let’s have a level-headed look at this. There are too many good points that need addressing.

Job Creation

First, 114,000 seems deflated, after 39 consecutive months (Jan ’21-Mar ’24) of growth rate that was [Pick one: spectacular, meteoric, explosive, greater-than-expected] and that continued in unprecedented ways, not to mention the past three months that were not spectacular but good, nonetheless. Approximately 16 million jobs created in one presidential term is a feat never done before, so we were, therefore, spoiled like a kid with too many rich uncles on Christmas day.

And that 114,000 number is still about five percent higher than the monthly number we need to keep up with the growth of our population and our civilian labor force.

Employment Numbers Actually Rose

The reason the unemployment rate jumped by 0.2% is because a large bulge of workers optimistically re-entered the job market in the previous two months without a job in hand. These things work out in the short- to mid-term, which is why most of us observers like three-month numbers or better. In July’s case, 67,000 more people were employed than in June, enough to keep unemployment to a 0.1% uptick. The only problem is: 420,000 came back in. A one-month snapshot serves no purpose, other than to cause misplaced doom or glee, depending.

More People Working: Labor Force Participation Rate

An oft-overlooked indicator, the labor force participation rate – a reliable sign of sustainable strength in the job market –inched up by 0.1% to 62.7%.

Wages Continue to Rise

On top of all this, average earnings continue to rise, now at 3.6% over the last 12 months, and continuing to outpace inflation.

Headed for Recession? Not Yet

Now, while this is going on, there’s an increase in talk about recession. Really? After one weak month? A recession is defined as two consecutive quarters of economic contraction. Now then, the American economy grew by a very healthy 2.3%, which doesn’t look like much of a recession, either upon us or approaching. In my view, that’s political talk in what is already the craziest presidential campaign year since Teddy Roosevelt ran as a Progressive in 1912. We would do well to eschew the hyperbolic artillery fire. It’s coming so prematurely because there are only 94 days left before election day, and if you’ve got an agenda, you can’t wait. It happens every time.

And it evokes Mark Twain’s famous line: “Reports of my death are greatly exaggerated.”

But suppose we’re headed for a recession. First, we’re officially a minimum of six months away, if not more. Second, recessions are inevitable, natural, and necessary. Since 1785, there have been 51 recessions of varied lengths, severity, and frequency. There will always be an upcoming recession; it’s like your lungs or heart that expands and then contracts. The real question is how do we lengthen the time – growth periods – between recessions and how do we soften the blow when one is upon us? The Great Recession of 2008-9 was the worst in history other than the Great Depression, but it was followed by the longest recovery in history: 10 years and 8 months, interrupted by none less than Covid.

No Big Deal

All in all, and taken as a whole, the job market’s performance in July was not good. But it was no big deal either.