RALEIGH – Isn’t the economy slowing down? Isn’t the Federal Reserve’s fight against inflation with rising interest rates hurting consumers and businesses? That’s the conventional wisdom, but don’t tell job seekers. They still have many opportunities.
Blame fallout from the Covid pandemic for the mixed economic picture, says N.C. State economist Dr. Michael Walden.
Job openings in the U.S. surged by 400,000 in April to 10.1 million. In May, U.S. employers added 278,000 jobs – higher than analysts expected. And in North Carolina as the unemployment rate fell to 3.4% in April all 15 metro areas across the state reduced jobless rates.
So what is going on? More jobs data is due out Friday morning as economists at the Fed and elsewhere continue to try to understand what’s happening.
Responding to queries from WRAL TechWire, Walden offered his analysis of what’s happening.
The Walden Analysis
“As I stated before, we are in a situation where the ‘Covid cycle’ is working against the ‘business cycle.’
“By Covid cycle, I mean the recovery from the extraordinary Covid recession, where unemployment jumped to 14% and thousands of businesses were closed for several months. For the last two years, we have been in recovery mode from Covid, culminating recently in the official declaration that the pandemic is over. There is still tremendous pent-up demand by consumers wanting to purchase what they had to put-off.
“Also, although it has diminished, the multi-trillion additional savings households accumulated from the various federal Covid-relief plans are still a spending accelerator for some households. And with normalcy returning to personal interactions, all the firms that saw a collapse in activity – restaurants, hotels, personal services – are now on the rebound and hiring.
“But at the same time, we are in the ‘downside’ of the business cycle, as the Fed tries to cool off the economy to moderate inflation. This downside is pointing to either a significant slowdown in economic activity or an outright reduction in activity.
“The unique situation we are in is that the Covid-cycle and the business cycle are pushing the economy in opposing directions – with the Covid cycle meaning faster growth, and the business cycle indicating slower growth. This is why so many indicators and measures are moving in opposite directions, thereby making it confusing to ascertain a specific economic path.
“The next six to nine months will see which cycle wins. Or, rather than one cycle winning, there could be a hybrid result – what I dubbed in my previous message the “full employment recession.”
“In the full employment recession, one part of the economy (the capital part) is receding, while another part (the labor part) continues to grow.
“For a professional economist, there are interesting and unique times, all stemming from the unique worldwide pandemic we lived through. With unique times, it shouldn’t be surprising economic conditions are not moving as they did in the past. Let’s hope that the positive part of this uniqueness wins out.”