The strong US jobs report may mean more interest rate hikes coming, UNC professor says

CHAPEL HILL – The latest data on the employment situation in the United States showed that the American economy added 372,000 jobs in June, surpassing analyst expectations.

The report, from the U.S. Bureau of Labor Statistics, also showed that the unemployment rate in the country remained unchanged, at 3.6%.

“We’ve had a heck of a report,” said Christian Lundblad, a Richard Levin Distinguished Professor of Finance at the University of North Carolina at Chapel Hill, on a media briefing hosted on Friday morning.

“Strong growth with employment up 372,000 for the last month just ended, well above market expectations,” said Lundblad.

And while, on net, this is a solid report, said Lundblad, “we stand here this morning yearning for more clarity.”

That’s because the U.S. economy is showing a really strong report on the labor market, suggesting a lot of strength, but at the same time, there are other economic measures such as inflationary pressures and consumer sentiment that we’re all feeling, said Lundblad.

Friday’s jobs report could be telling as recession worries mount

Not a recession?

Looking at the latest month of employment data, which surpassed earlier expectations, suggests that the U.S. economy is not currently in a recession, said Dr. Anne York, a professor of economics and program director at Meredith College, in an interview with WRAL TechWire on Friday morning.

“If we look at the employment data alone, no one can say that we are in a recession,” said York. “We still had very strong growth in nonfarm payroll numbers of 372,000 jobs added to the economy and near an all-time low unemployment rate of 3.6%. ”

And there was growth across all industries, except in government jobs, York noted.

Further, said York, the latest Job Openings and Labor Turnover Survey, released earlier this week, showed there were 11.3 million job openings in May, or 1.9 positions for every job seeker, and historically low levels of layoffs. That data, too, said York, “shows a strong labor market.”

But, there are other indicators that the U.S. economy may be in a recession, including waning GDP growth for the second quarter and future expectations, said Lundblad.

Big jobs surprise: US adds 372,000 in June despite recession fears

Back to pre-COVID levels?

Employment is back to pre-COVID levels, said Lundblad, though noting that the employment markets have changed during the last two and a half years.

“Employment still remains slightly below where we were, some sectors have surpassed it, some have not,” said Lundblad. “This does not look like a dire situation, despite that we’re all struggling with the inflation we’re all feeling and the economic declines along some other dimensions.”

But what Lundblad said was of interest in the latest month of employment data is not just the overall level of unemployment, which remained unchanged at 3.6%, but the rate of people who are working but feel underemployed.

Those are people that are working part-time who would perhaps prefer to be working full-time, Lundblad explained. “But again, there, we’re essentially reaching record lows.”

Recession coming? No, it may already be here – NCSU economist explains why

And another measure of the labor market is the labor force participation rate among prime-age workers, which has returned, mostly, to the level it was pre-COVID, said Lundblad.

“There are, however, many Americans who have retired, and are not coming back,” said Lundblad.

But the overall data on labor force participation remains an indicator that may be important to track, said York. That’s because overall, said York, “we still have fewer people working or looking for work than we did before the pandemic.”

That’s even as employers of all sizes, from small businesses to Fortune 100 companies, continue to post job openings. Still, the latest job posting data isn’t uniform across the economy, as there may be a changing balance of power between tech workers and tech companies as some have indicated a slowdown in hiring, including Meta.

“While it is good for workers that we have a strong labor market, this can be an inflationary force in the economy,” said York.

Through turbulent labor market, job opportunities abound in the Triangle

Inflation and response

Should inflationary pressures continue, the Federal Reserve will continue to move aggressively to counter them, said Lundblad, noting that the economy’s strong labor market data may enable a more aggressive response to curb inflation.

“A testament to the strength of the labor market,” said Lundblad, “hourly wages are above historical average trends.”

But real wages, measured by adjusting wages for inflation, are not moving as quickly, and in some cases, and in some industries, may actually be shrinking, said Lundblad.

“A really complicated environment,” said Lundblad. “If this puts pressure on inflation, the Fed will have to move.”

And another three-quarters of a percentage point increase in the Federal Funds rate is not out of the question, said Lundblad. “The Fed will not necessarily be backing off,” he added.