In April, the U.S. economy created a disappointing 175,000 jobs, falling short of expectations and pushing unemployment to 3.9% (see current trends here). This signals a slowdown in the economy that could force the Federal Reserve to put back the guardrails. Our guest commentator takes a closer look at a worrying trajectory: while part-time jobs are on the rise, full-time employment has fallen, portending a coming recession.
THE next article was originally published by the Mises Institute. The opinions expressed do not necessarily reflect those of Peter Schiff or SchiffGold.
According to a new report from the federal Bureau of Labor Statistics this week, the American economy created 175,000 jobs for the month of April while the unemployment rate increased slightly to reach 3.9%. The new reported job growth was considered a “failure” as it fell short of expectations, and for the first time in months the media did not qualify the job report. use of “explosion” or “loud”. Instead, the official narrative seems to be that the “slowing economy” will cause CPI inflation to fall, and so the Federal Reserve will soon force interest rates lower and cause the legendary “low landing.” candy “. So it's no surprise that the lackluster jobs report led to a rally in stocks, as Wall Street anticipates a Fed rate cut.
For anyone who has taken a more skeptical view of jobs reports over the past year, there isn't much surprising about this report, except that it appears that salaried jobs could Finally reflect reality. Overall, this report is just a continuation of current trends: namely, full-time jobs are declining and the “job growth” so enthusiastically reported by the media does not seem be reflected in terms of people actually employed. If we take a closer look at this report, we actually see that the total number of people employed has remained stable while half a million full-time jobs have disappeared over the past year.
Establishment survey and household survey
The establishment survey report shows that total employment — a total that includes both part-time and full-time jobs — increased by 175,000 month over month in April. However, the establishment survey only measures total employment and does not measure the number of employed people. This means that even when employment growth comes primarily from people holding multiple part-time jobs, the establishment survey shows large increases, while the total number of employed people does not. In fact, the total number of people employed may decrease while the total number of jobs increases. In April, while the total number of jobs increased by 175,000, the total number of employed workers increased by only 25,000.
This part-time employment situation may help explain why there has been a significant gap between the establishment survey and the household survey since the start of 2022. Looking at the total increase in both measures in Over the past three years, we see a gap widening and persisting for over two years. In fact, according to the April report, the gap is 3.6 million. The household survey also shows that the total number of employed people has remained virtually unchanged for nine months. Since August 2023, the total number of people employed has decreased by 9,000. Over the same period, total “jobs” have increased by more than 1.8 million. Since November, the total number of people employed has decreased by 375,000. Overall, the total number of people employed has remained stable over the past nine months.
Assuming that the establishment survey gives a realistic picture of the economy – an assumption that may or may not be true – then the current economy produces far more jobs than actual workers.
A recession in full-time jobs
If we compare the total growth in employed people versus the total growth in “jobs”, we see that there is virtually no growth in the number of employed people despite a steady increase in the number of jobs. It appears that the job growth we are seeing is mostly in part-time jobs.
During the nine months in which total employed people stagnated – and total jobs increased by 1.8 million – we mainly see growth of part-time jobs. Over the past twelve months, the total number of part-time jobs has increased by one million. During the same period, full-time jobs fell by more than 500,000. In other words, the net job creation during this period was entirely part-time. The chart compares full-time and part-time job growth since January 2022. We see that since the start of 2022, full-time job growth has increased by 2%, while job growth part-time work increased by almost 8%. Since the start of 2023, full-time jobs have stagnated while part-time jobs have increased significantly.
Indeed, over the last three months, year-over-year measurement of full-time employment fell into recession territory. Full-time employment declined year over year in February, March and April. Over the past fifty years, three consecutive months of negative full-time employment growth have always been a signal of recession and have occurred when the United States was in, or about to enter, a recession:
The full-time employment indicator now reflects what we saw in temporary jobs for months. For decades, every time temporary help services are negative, year after year, for more than three consecutive months, the United States is heading towards recession. This measure has now been negative in the United States for eighteen months.
This is to be expected in a declining economy. Empirical studies have shown that economies tend to shift toward part-time work during economic downturns to give employers more flexibility in cutting costs. This has been observed internationallyand not just in the United States.
Likewise, temporary jobs are often the first jobs to be cut by companies and, as the BLS says, “the flexible work arrangements offered by temp agencies allow companies to scale back their activities easily and without having to pay severance pay or let employees work for themselves. start from their best workers. In a declining economy, there is no longer a need to use SAT workers as a means to screen potential new workers or add work hours to supplement the full-time workforce. It appears that over the past year the need for new workers is fading quickly and that cutting temporary workers is a cheap way to cut costs.
A closer look reveals a lot of worrying data in leading indicators: The Philadelphia Fed's manufacturing index is falling. in recession territory. THE it's the same from the Richmond Fed's manufacturing survey. Conference Board Leading Indicator Index continues to point towards recession. THE yield curve indicates a recession. Commercial real estate is in great difficulty. Net savings went negative for only the second time in several decades in 2023, and has now been negative for four consecutive quarters. The economic growth we are seeing is fueled by the biggest deficits since covid.
Indeed, we may finally be reaching the point where more perceptive, but more cautious, observers are beginning to declare that the U.S. economy is truly “in recession.” Indeed, today, on the Forward Guidance podcast, Fed observer Danielle DiMartino Booth Said this:
“Given the weakness in industrial production, given what the revisions to personal income minus government transfers say…Given what we're seeing, it increasingly looks like the United States is indeed entered into recession. » She suggests that the current recession started in October 2023.
Despite all this, some members of the caste of economists and permabull-booster investment salesmen continue to suggest that a “soft landing” is underway and that “disinflation” will soon set in.
Wednesday's FOMC press conference, however, suggests that Chairman Powell and Fed economists have noticed that the talk of disinflation doesn't actually seem to reflect reality. As Last month's CPI data showed, Price growth reached its highest level in seven months in March, amounting to 3.5 percent. The so-called “core CPI” rose to 3.8 percent, almost double the Fed's arbitrary 2 percent price inflation target. Despite this persistent price inflation, Powell essentially said he would not raise the key interest rate anytime soon. This suggests that Powell is well aware of the weak employment situation and knows that the fragile labor market cannot withstand further rate hikes.
In other words, consumers should get used to continued price inflation. The Fed won't let interest rates rise, even if it should– to combat price inflation. Rather, the Fed still hopes it can thread that needle to lower inflation while somehow maintaining the easy-money-fueled jobs boom. But it may already be months too late for the Fed to realize this fantasy. This would not be the first time that the Fed has delayed for months admitting the truth about the recession. In 2008, a few months after the start of the Great Recession, Fed Chairman Bernanke declared on television that there was no recession on the horizon. Powell could soon find himself in a similar situation.
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