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As recession fears mount, strong US hiring likely slows

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WASHINGTON (AP) – The US job market has defied fears of rising inflation, rising interest rates, and a growing recession. Month after month, US employers kept adding hundreds of thousands of workers, often beating forecasters’ expectations.

But now economists worry that hiring is beginning to show signs of weakness, threatening the last remaining redistribution of the United States’ economic might. Job opportunities are few, and the number of Americans signing up for unemployment benefits is increasing.

“When we look at the labor market, we are starting to show widespread signs of cracks,” said Sarah House, senior economist at Wells Fargo. “Overall the conditions are not as strong as we were seeing three to six months ago.”

The Labor Department reports on Friday how many jobs were created in July and whether the super-low US unemployment rate is beginning to last longer.

Forecasters expect the economy to have gained an average of 250,000 jobs last month, according to a survey by data firm FactSet. That would be a solid number in normal times but a major drop for 2022: Employers are hiring an average of 457,000 workers a month so far this year.

A cement mixer truck is reflected on the window of a window advertising retail space for rent in a residential and commercial building under construction in the Essex Crossing development on Manhattan’s Lower East Side, Thursday, August 4, 2022. On Friday, Aug. On October 5, the Labor Department delivers its July jobs report. (AP photo/Mary Altafer)

Photo: Associated Press/Mary Altafer

Construction workers are seen working on a high-rise residential and commercial building under construction in the Essex Crossing development on Manhattan’s Lower East Side, Thursday, August 4, 2022. On Friday, August 5, the Labor Department delivers its July jobs report. (AP photo/Mary Altafer)

Photo: Associated Press/Mary Altafer

Construction workers unload sheet rock in a residential and commercial building under construction at the Essex Crossing development on Manhattan’s Lower East Side, Thursday, August 4, 2022. On Friday, August 5, the Labor Department delivers its July jobs report. (AP photo/Mary Altafer)

Photo: Associated Press/Mary Altafer

A member of a carpenter’s union protest with an inflatable rat a contractor building Shake Shack on Manhattan’s Lower East Side, Thursday, Aug. 4, 2022. On Friday, August 5, the Labor Department delivers its July jobs report. (AP photo/Mary Altafer)

Photo: Associated Press/Mary Altafer

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The unemployment rate is expected to be at 3.6 per cent for the fifth straight month, just below a 50-year low.

The job news will also have political implications: Worries about higher prices and the risk of a recession are likely to weigh on voters in November’s midterm elections, potentially making it harder for Democrats of President Joe Biden to take control of Congress. .

The economic background is troubling: GDP – the broadest measure of economic output – fell in both the first and second quarters; A steady decline in GDP is one definition of a recession. And inflation is roaring at a 40-year high.

The continued strength of the job market – particularly the low unemployment rate – is the main reason why most economists do not believe that the recession has just begun, although they increasingly fear that one is on the way. History is not entirely convincing: the unemployment rate was even lower – 3.5% – when the 11-month recession began in December 1969.

Americans are not alone in grappling with difficult economic times.

Fears of recession are also increasing in Europe. In the United Kingdom, the Bank of England projected on Thursday that the world’s fifth-largest economy will hit a recession by the end of the year.

Russia’s war in Ukraine has darkened outlooks across Europe. The conflict has made energy supplies scarce and pushed up prices. European countries are prepared for the possibility that Moscow will continue to reduce – and perhaps cut out entirely – the flow of natural gas, used to power factories, generate electricity and keep homes warm in winter.

If Europeans cannot store enough gas for the colder months, industry may need to ration.

Economies have been on a wild ride since COVID hit in early 2020.

The pandemic brought economic life to a near standstill as companies shut down and consumers stayed home as a health precaution. In March and April 2020, US employers cut a staggering 22 million jobs and the economy plunged into a two-month deep recession.

But massive government support – and the Federal Reserve’s decision to slash interest rates and pump money into financial markets – fueled a surprisingly quick recovery. Caught off guard by the force of the rebound, factories, shops, ports and freight yards were overwhelmed with orders and scrambled to bring back workers who were hit by COVID.

The result has been shortages of workers and supplies, delayed shipments – and rising prices. In the United States, inflation has been rising steadily for more than a year. In June, consumer prices rose 9.1% from a year earlier – the biggest increase since 1981.

The Fed previously underestimated the resurgence of inflation, thinking that temporary supply chain disruptions were causing prices to rise. But inflation refused to go.

Now the central bank is responding aggressively. It has raised its benchmark short-term interest rate four times this year, with further hikes in the rates.

Higher borrowing costs are taking a toll. For example, rising mortgage rates have cooled a red-hot housing market. Sales of pre-occupied homes fell for the fifth straight month in June.

Real estate companies – including lending firm Loan Depot and online housing broker Redfin – have started laying off workers.

The labor market is showing other signs of volatility.

The Labor Department reported Tuesday that employers posted 10.7 million job openings in June — a healthy number but the lowest since September.

And the four-week average number of Americans signing up for unemployment benefits — a proxy for layoffs that smooth out week-to-week swings — rose last week to the highest level since November, though the numbers were seasonal. factors may be exaggerated.

Friday’s jobs report comes at a pivotal moment for President Biden, who has said the economy is only slowing rather than heading into recession. Inflation has garnered public support for Biden, yet the administration has insisted that a 3.6% unemployment rate and solid job gains are signs of a healthy economy.

White House press secretary Karine Jean-Pierre said the administration expects a further slowdown in hiring momentum in the coming months as the unemployment rate is already near historic lows and there are fewer potential workers available.

Slow hiring rates and low levels of wage growth may also suggest that inflationary pressures are easing, but the White House has attempted to convince the American public that low growth is a positive moment when Republican lawmakers Saying that the recession has already started; They cite a decline in GDP in the first half of the year.

“We are expecting close to 150,000 jobs per month,” Jean-Pierre said at Thursday’s briefing. “This kind of job growth is in line with the low levels of unemployment that we are seeing.”

The Economist House at Wells Fargo expects employers to continue adding jobs for a few months. But rising interest rates, she said, will gradually stifle economic growth.

“We’re really looking for an outright drop in hiring in the first quarter, probably the second quarter of next year,” she said. “As monetary policy tightens, it is going to have an impact on the overall business conditions and hence on the demand for workers.

“We expect the US economy to slip into recession, probably early in the year.”

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Josh Bock in Washington and Courtney Bonnell in London contributed to this story.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

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