For months, as inflation rose and Federal Reserve acted aggressively to tamp it down, one question loomed over the monthly employment reports: Has the labor market ever succumbed to gravity?
The answer, so far, has been “No, mostly no”. But in the July report, which arrived on Friday, the answer is probably: “Yes, but it didn’t crash into the ground.”
Since supply chain issues and the war in Ukraine sent prices skyrocketing, the brightest feature of the economy has been robust job growth, with 6.3 million jobs created over the past 12 months. In June, the United States was less than 520,000 jobs from its pre-pandemic peak, held back by a decline in public employment.
But that recovery is coming under increasing strain as inflation has eaten away at consumers’ purchasing power and clouded their mood, and rising interest rates have started to weigh on demand for purchases. important like houses and cars. Gross domestic productadjusted for inflation, fell for the second consecutive quarter, held back by slowing inventory growth and lower residential investment.
And, lately, there have been signs that economic headwinds are affecting the labor market as well. Jobs fell from their spring highs, driven by lower demand for workers in retail, leisure and hospitality. Initial claims for unemployment insurance soared to 260,000 a week last month, from a low of 166,000 a week in March. Hiring on LinkedIn has been slowdown since Aprilparticularly in construction and hotel accommodation.
On average, forecasters expect Friday’s report to show the country added 250,000 jobs in July. Last month’s report showed a gain of 372,000 in Juneequal to the previous three months.
The polling and analysis company Morning Consult, which surveys about 20,000 people per week, noticed an increase in the number of adults in the United States who report losing income due to layoffs or reduced hours. Consistent with research showing that people of color are hit hardest by the hiring slowdown, those increases have been greatest among black and Hispanic workers.
The rise in revenue losses has not, however, been concentrated in sectors susceptible to peaks in coronavirus transmission, as has been the case since 2020.
“It’s not a Covid story – I think it’s a broader macroeconomic downturn,” said Morning Consult chief economist John Leer. “People were hoarding workers and right now we’re at a point where it makes sense to let them go because of the uncertainty in the business cycle.”