The assassination of former Japanese Prime Minister Shinzo Abe shocked the world. President Joe Biden said in a statement Friday morning that he was "stunned, outraged, and deeply saddened" by the tragic shooting. Biden on Friday also signed an executive order aimed at protecting abortion access. And the government’s latest monthly jobs report topped expectations and called into question all those forecasts of recession. More on that below.
No Sign of Recession as Job Market Stays Hot
Payrolls grew by 372,000 in June, the Labor Department announced Friday, easing fears over a potential recession while clearing the way for another round of interest rate hikes by the Federal Reserve later this month and beyond.
The unemployment rate held steady at 3.6%, as analysts expected, while the alternative U6 measure of unemployment, which includes discouraged and some part-time workers, fell sharply to 6.7% — an all-time low that suggests the labor market remains exceptionally tight.
Wages grew at a 5.1% annual clip in June, slightly above expectations but nevertheless a decline from the month earlier, when the annual rate hit 5.3%. The results suggest wage pressures are easing and provide little support for the view that inflation is being driven by workers’ demands for pay increases.
One disappointing number in the report was the labor force participation rate, which ticked lower to 62.2%. Still, that points to tighter labor market conditions as some workers move to the sidelines.
“The U.S. labor market is defying gravity,” said Becky Frankiewicz of the staffing firm Manpower Group. “Fears of a possible recession stoked by inflation and an aggressive Fed are eclipsed by the simple reality that employers can’t hire fast enough to meet demand.”
Private employment recovery: With private sector employment 140,000 higher in June 2022 than in February 2020, the economy has now recovered all the private sector jobs lost during the pandemic.
Overall employment, however, is still slightly lower, down 524,000, or 0.3%, relative to early 2020, due to a shortfall in public sector employment of roughly 664,000.
Julia Pollak, chief economist at ZipRecruiter, said in a note that the economy is creating lots of high-quality, well-paying jobs, especially in services. At the same time, job growth was broad-based in June, with gains recorded in retail, manufacturing and construction as well as areas like business management, scientific research and the information sector.
No recession in sight as the Fed tees up another hike: While some other economic data have raised concerns of a downturn, the strong jobs report “appears to make a mockery of claims the economy is heading into, let alone already in, a recession,” said Andrew Hunter of Capital Economics. RSM’s Joseph Brusuelas emphasized the point, writing that “an American economy in free fall does not tend to produce 372,000 jobs in any given month.”
Many analysts said the report underscores the need for the Fed to continue to move aggressively as it tightens monetary conditions. “The labor market is very hot,” Jeffrey Rosenberg of BlackRock told Bloomberg. “The Fed has to do more.”
“After this report, you can pretty much count on 75 basis points in July,” said Jim Caron of Morgan Stanley Investment Management. “The job market is strong and it’s not giving up any growth.”
Still, some analysts are worried that the Fed will push too hard and drive the economy into a recession as it looks to curb inflation. “There is a feeling of Wile E. Coyote running over the cliff, the economy is slowing, Fed hikes will almost certainly lead to a hard landing, but with employment remaining this strong, and next week’s [inflation report] likely to stay high, the risk that the Fed will hike higher and further than they should increases,” said Steve Chiavarone, senior portfolio manager at Federated Hermes.
Quotes of the Day
“Right now, the labor market is not the problem child, it is being the well-behaved kid, so the Fed thinks they can kind of ignore the labor market right now and focus all on inflation.”
— Victoria Greene, chief investment officer at G Squared Private Wealth, commenting on the June jobs report.
“Nothing epitomizes market failures more than the cost of insulin. Many Americans experience out-of-pocket costs anywhere from $300 to $500 per month for this lifesaving drug. California is now taking matters into our own hands.”
– California Gov. Gavin Newsom, a Democrat, announcing in a video posted to Twitter Thursday that his state would begin making its own insulin “at a cheaper price.” Newsom said the state budget he just signed for 2022-2023 includes $50 million for the state to develop “low-cost insulin products” and another $50 million will be used for an insulin-manufacturing facility that Newsom said would “provide new, high-paying jobs and a stronger supply chain for the drug.”
Number of the Day: 3.1
The national average price of a gallon of regular gasoline fell 3.1 cents from Thursday to Friday, according to AAA. That’s the largest one-day drop since 2008, and gas prices have now fallen for 24 straight days — though they remain high, at an average of $4.72 a gallon, down from $4.96 a month ago but up from $3.14 a year ago.
Chart of the Day: The Incredible Shrinking IRS
The Urban-Brookings Tax Policy Center this week highlighted how the Internal Revenue Service’s workforce has shrunk relative to the U.S. population. In fiscal year 1991, the agency had 451 employees per million U.S. residents. By last year, that figure had fallen to 237.
News
- A Robust June Jobs Report Clouds Outlook for US Economy – Associated Press
- No Recession Here: Hot Jobs Market Tames Fears of Slump – Politico
- Fed Officials Commit to Cool Prices as Jumbo-Hike Backing Grows – Bloomberg
- Inflation, Expenses Rise Sharply as Priorities: AP-NORC Poll – Associated Press
- Crunch Time for the Democratic Agenda – Roll Call (podcast)
- Dems Weigh Jamming McConnell on China Bill – Axios
- US to Send 15th Military Package to Ukraine, Bringing Total Aid in Russia War to $7 Billion – CNBC
- Biden Says No Decision Made on Rolling Back China Import Tariffs – Bloomberg
- Energy Department Announces $40M to Boost Electricity, Weatherization in Low-Income Communities – The Hill
- By Firing His Enemies, Trump Made Their Taxes More Interesting to the IRS – Washington Post
- The US Industrial Complex Is Starting to Buckle From High Power Costs – Bloomberg Businessweek
- China Considers $220 Billion Stimulus With Unprecedented Bond Sales – Bloomberg
Views and Analysis
- States Are Cutting Taxes En Masse. They May Soon Regret It. – Catherine Rampell, Washington Post
- Jobs Report Gives Powell a Little More Runway on Rates – Jonathan Levin, Bloomberg
- Biden’s Reckless Spending Set Off Inflation. Can You Believe He Wants to Add More? – Marc A. Thiessen, Washington Post
- Low Unemployment Won’t Save This Economy – Kevin T. Dugan, New York
- Senate Moves Forward on Exceedingly Modest Drug Price Reform – David Dayen, The American Prospect
- Let the Child Tax Credit Work – Ian Berlin and William G. Gale, Tax Policy Center
- One Strong Global Minimum Tax Beats Two Weak Ones – Thornton Matheson, Tax Policy Center
- The Debt Ceiling Strategy Is No Excuse to Go Nuclear on the Filibuster – Michael Thorning, The Hill
- That Was the Stagflation That Was – Paul Krugman, New York Times
- The Worst Virus Variant Just Arrived. The Pandemic Is Not Over. – Washington Post Editorial Board
- The Vaccines Were a Biomedical Triumph. They Reached Too Few. – Washington Post Editorial Board