The July 2022 Jobs Report
In July, the official Bureau of Labor Statistics unemployment rate fell to 3.5%. It has not been that low since the first months of 2020 before the pandemic began. But unemployment rates were still quite high for African Americans (6%), teens (11.5%) , and especially for Black teens (20.3%).
Why Aren’t More People Working?
Even in this booming labor market, there are still part-timers who cannot find full-time work and a lot of other job-wanters who are not actively searching because they are not confident of finding a decent job, or they cannot make child-care arrangements, or they still fear COVID infections at work. Including hidden unemployment, the National Jobs for all Network found that real unemployment was 9.1%. More broadly, it is a fact that for many decades U.S. job quality, in terms of pay, benefits, worker participation, and leave and child-care policies, has been lousy. The pandemic, federal policies, the Great Resignation, and unionization drives have not yet changed underlying structures very much.
But there are still a lot of job openings. Total job openings reported by employers were 10.7 million. That’s very high. In fact, pandemic levels of vacancies are unprecedented in the twenty-two-year history of the statistic.
Current vacancy numbers could include a lot of catch-up from so-called labor shortages. And employers may be listing more openings than they really need, driven by past difficulties in getting workers. If employers think that there will be a significant recession with reduced business activity, they will cut the number of job offerings. Will we see such a reduction in the next job vacancy report on August 30?
Real Wages Lag
For two years, employers have been eager to hire. So money wages (what’s in your paycheck) have been rising. But for rank-and-file workers, hourly, after-inflation pay was 2.7% less in July than a year ago. Consumer prices for such workers rose 9% for the year. Workers aren’t getting rich off inflation. The oil companies certainly are.
Are We in a Recession?
We won’t know for a while. The total output of the U.S. economy fell a bit in the last two quarters, but such a decline is not the official definition of a recession. A private firm, The National Bureau of Economic Research, weighs a bunch of factors and it takes time for them to make a decision. But it will be hard for any agency or politician to assert that we have been or are in a recession when we have had solid increases in job totals this year. In July, 528,000 non-farm jobs were added. Since December of 2021, we added 3.3 million non-farm jobs. That’s no recession.
But some experts and Federal Reserve policy makers don’t want more jobs. They want more people desperate for jobs and willing to work for less than they expect to be paid now. If Fed policy succeeds, we will get a real recession and higher unemployment.
Could Government Authorities Cut Inflation Rates without Sending the Economy into Some Kind of Recession?
The short answer is yes, but it would involve thinking outside the box, and most economists don’t seem to be interested in discussing such alternatives. I am a historian of the economy, not an economist, and I was dismayed to find that over many decades the experts expended little energy to find softer ways than higher unemployment to tame inflation. Today, many economists–including the informative liberal Paul Krugman–are happy that the Federal Reserve is jacking up interest rates to raise unemployment, scare workers, and cut wage increases. Left-wing economists do not share that enthusiasm.
Better methods would include some of the measures being taken by the Biden administration. Government fixes (releasing oil from the nation’s emergency reserve), along with general economic forces, have started to bring gas prices down. Price controls in selected areas of the economy could help. Just-passed legislation giving Medicare more power to bargain over drug prices will help eventually.
Good-bye to the Great Resignation
Higher unemployment–the goal of current monetary policy–will weaken the bargaining leverage that many workers gained during the pandemic. That is the point of Fed policy. Control inflation with pressure on wages, not on prices.
As we move through the next few months, there will be less evidence of the Great Resignation. Fewer workers will stay on the sidelines waiting for better offers. Fewer will be able to quit their jobs with confidence that they can find something else pretty easily. And the best chance for real wage gains since the late 1990s may evaporate before inflation is brought under control. And if policy aims first to cut wage increases, why expect something better?