Is the recession canceled? A strong new jobs report ‘appears to make a mockery of’ the shrinking economy argument

July 8, 2022, 4:37 PM UTC
A man walks past a sign that says "now hiring."
Are recession fears unfounded?
Oliver Douliery/AFP via Getty Images

There’s been no shortage of predictions of an impending economic downturn from Wall Street so far this year. 

And recently some experts, including ARK Invest’s Cathie Wood and even Elon Musk, have argued the U.S. economy may already be in the midst of a recession—at least based on the technical definition, which involves two consecutive quarters of shrinking gross domestic product.

With inflation raging at a four-decade high, stocks and crypto sinking, and the bond market experiencing its worst year since 1973, there have been plenty of economic signs to be pessimistic about in 2022.

On Friday, however, Americans got some good news. The labor market, which has been red-hot throughout the year, remains robust.

The U.S. economy added 372,000 jobs in June, according to the Bureau of Labor Statistics, blowing away economists’ estimates for 250,000. As a result, the private sector has now recovered all of the jobs it lost during the pandemic. 

But does that mean the recession is canceled? Andrew Hunter, a senior economist at the independent macroeconomic research firm Capital Economics, believes so.

“The strong 372,000 gain in non-farm payrolls in June appears to make a mockery of claims the economy is heading into, let alone already in, a recession,” he wrote in a Friday research report.

Hunter added that there was “little sign of weakness in the details” of Friday’s jobs report, with every major industry seeing jobs gains, and the unemployment rate holding steady at 3.6% for the fourth consecutive month. 

He also noted that the low unemployment rate provides evidence that worker shortages, which have plagued U.S. businesses since the pandemic began, are “no longer quite as severe as they were a few months ago.”

Hunter wasn’t the only economist singing the praises of the latest jobs report. Morgan Stanley’s economics team, led by Julian Richers, wrote in a Friday research note that despite ongoing recession fears, this month’s jobs numbers “provide an important signal that the labor market is still holding up.”

And Bill Adams, Comerica Bank’s chief economist, told Fortune that there was “no sign of a recession” in this week’s jobs report.

“A better-than-expected jobs report demonstrates that the U.S. economy was not in a recession in the first half of the year,” he said. “Aggregate hours worked by private workers rose 2.6% annualized in the second quarter of 2022 after 3.4% annualized growth in the first quarter—you just don’t see that in a recession.” 

The strong jobs report led the Biden administration to take a victory lap on Friday.

“This has been the fastest and strongest jobs recovery in American history,” President Biden wrote in a statement. “It would not have been possible without the decisive action my Administration took last year to fix a broken COVID response, and pass the American Rescue Plan to get our economy back on track.”

And some economists were quick to back up the President’s statement. 

“But for @POTUS’ American Rescue Plan we would not be discussing the continued recovery of the labor market today,” William Spriggs, an economics professor from Howard University, said in a Friday tweet. “A slower recovery would have not kept inflation down, but would definitely have kept unemployment higher.”

There were some negatives in Friday’s jobs report. The workforce participation rate of prime-age workers, or those aged 25 to 54, fell from 82.6% to 82.3% in June, its lowest level since March.

Average hourly earnings also rose by just 0.3% in June and 5.1% from a year ago, which means real wage growth was negative when accounting for inflation. 

But Bank of America economists, led by Michael Gapen, said that this is evidence that the economy has reached “peak wage pressures,” meaning wage gains should fall from here. That will help to avoid a wage-price spiral, where wage increases cause a consistent increase in inflation.

Overall, it was “another solid month of employment gains,” the Bank of America team wrote.

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