News Analysis
According to
a new report from the federal government’s Bureau of Labor Statistics last week, the U.S. economy added 175,000 jobs for the month of April while the unemployment rate rose slightly to 3.9 percent. The new reported job growth was considered a “miss” in that it came in below expectations, and for the first time in months, the media did not declare the jobs report to be “a blowout” or “strong.” Instead, the official narrative seems to be that the “slowing economy” will bring down consumer price index (CPI) inflation, and thus the Federal Reserve will soon force interest rates back down and bring about the fabled “soft landing.” Not surprisingly, then, the lackluster jobs report led to a rally in stocks,
as Wall Street anticipates a Fed rate cut.
For anyone who has taken a more skeptical view of the jobs reports over the past year, there isn’t much that’s surprising in this report, except for the fact that it appears that payroll jobs may finally be reflecting reality. Overall, this report is simply a continuation of ongoing trends; namely, full-time jobs are falling and the “job growth” reported so enthusiastically by the media doesn’t seem to show up in terms of actual people employed. If we look more closely at this report, what we really find is that the total number of employed people has flatlined while half a million full-time jobs have disappeared over the past year.
Establishment Survey Versus Household Survey
The establishment survey report shows that total jobs—which includes both part-time and full-time jobs—increased, month over month, in April by 175,000. The establishment survey measures only total jobs, however, and does not measure the number of employed people. That means that even when job growth comes mostly from people working multiple part-time jobs, the establishment survey shows big increases while the total number of employed people does not. In fact, the number of total employed people can fall while total jobs increases. For April, as total jobs rose by 175,000, total employed workers rose by only 25,000.This part-time jobs situation may help explain why there is a sizable gap between the establishment survey and the household survey since early 2022. If we look at the total increase in both measures over the past three years, we find a gap has opened and persisted over more than two years. Indeed, as of the April report, the gap is at 3.6 million. The household survey also shows that the total number of employed people has been virtually unchanged for nine months. Since August 2023, the number of employed people has decreased by 9,000. Over the same time period, total “jobs” has increased by more than 1.8 million. Since November 2023, the total number of employed people has fallen by 375,000. Overall, the total number of employed people has flatlined for the past nine months.
Assuming that the establishment survey is a realistic picture of the economy at all—an assumption that may or may not be true—then the current economy is producing many more jobs than actual workers.
A Recession in Full-Time Jobs
Looking at total growth in employed people, versus total growth in “jobs,” we find that there is virtually no growth in the number of employed people in spite of constantly rising totals of jobs. It appears the job growth we do see is overwhelmingly part-time jobs.Over the same nine months that the total number of employed people has stagnated—and total jobs increased by 1.8 million—we find primarily growth in part-time jobs. Over the past 12 months, total part-time jobs increased by 1 million. During the same period, full-time jobs fell by more than 500,000. That is, net job creation during that period has been all part-time. The graph compares how much full-time and part-time jobs have grown since January 2022. We find that since early 2022, full-time job growth is up 2 percent while part-time job growth is up nearly 8 percent. Since early 2023, full-time jobs have flatlined while part-time jobs have grown considerably.
Over the past three months, in fact,
the year-over-year measure of full-time jobs has fallen into recession territory. Full-time jobs were down, year over year, in February, March, and April. Over the past 50 years, three months in a row of negative growth in full-time jobs has always been a recession signal and has occurred when the United States has been in recession, or about to enter a recession.
The full-time jobs indicator now reflects what we’ve seen in
temporary jobs for months. For decades, whenever
temporary help services are negative, year over year, for more than three months in a row, the United States is headed toward recession. This measure has now been negative in the United States for the past 18 months.
This is to be expected in a weakening economy. Empirical studies have shown that economies tend to shift to part-time work in times of economic downturn as a means of allowing employers more flexibility in reducing costs. This
has been observed internationally, not just in the United States.
Similarly, temporary jobs are often the first jobs to be eliminated by firms, and as the BLS puts it, “flexible labor arrangements provided by temp agencies allow firms to scale down their operations readily and without the added expense of separation pay or having to let go of their best workers.” In a weakening economy, there is no longer a need to use THS workers as a means of screening potential new workers or adding work hours to supplement the full-time workforce. It appears that over the past year, the need for new workers is fading fast, and dropping temp workers is a cheap way to cut costs.
We now finally may be getting to the point at which more insightful but cautious observers start to declare the U.S. economy as truly “in recession.” Indeed, today on the Forward Guidance Podcast, Fed watcher Danielle DiMartino Booth
said this:
“Given how weak industrial production has been, given what the revisions say to personal income minus government transfers. ... Given what we’re seeing, it’s looking increasingly like the US has indeed entered recession.” She suggests the current recession began in October 2023.
In spite of all this, some members of the permabull-booster caste of economists and investment salespeople continue to suggest that a “soft landing” is in the works and “disinflation” will soon kick in.
The May 1 FOMC press conference, however, suggests that Fed Chairman Jerome Powell and the Fed economists have noticed that the disinflation narrative doesn’t seem to actually reflect reality. As
last month’s CPI data showed, price growth hit a seven-month high in March, rising to 3.5 percent. The so-called core CPI came in at 3.8 percent, almost double the Fed’s arbitrary 2-percent price inflation target. In spite of this persistent price inflation, Mr. Powell essentially declared that he won’t be raising the target policy interest rate any time soon. This suggests Mr. Powell is well aware of the weak jobs situation and knows the fragile jobs market can’t handle any additional rate hikes.
In other words, consumers should get used to ongoing price inflation. The Fed won’t let interest rates rise—although it should—to combat price inflation. Rather, the Fed is still hoping it can thread that needle of pushing down inflation while somehow keeping the easy-money-fueled jobs boom going. But it may be that it’s already months too late for the Fed to pull off that fantasy. It wouldn’t be the first time the Fed is months behind on admitting the truth about recession. In 2008, months after the Great Recession had begun, Fed Chairman Ben Bernanke was going on TV and saying there was no recession on the horizon. Mr. Powell may soon find himself in a similar position.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
