Strong jobs report staves off fears of a recession amid rising prices

Judy Woodruff:

Despite worries expressed lately about whether the U.S. is sliding into a recession, today's surprisingly strong jobs report suggests otherwise.

The U.S. has averaged adding nearly 375,000 new jobs a month for the past three months, and private sector employment has returned to where it was before the pandemic. But there are still real concerns and warning signs, inflation, for one. Wages continue to climb, but consumer spending and confidence are down, and the overheated housing market is starting to cool.

To get a better read on all of this, I'm joined by special correspondent Catherine Rampell. She is a columnist for The Washington Post.

Catherine, thank you so much for being here.

Should we believe our eyes. Is this jobs report as strong as it looks?

Catherine Rampell:

It looks pretty good.

We have had several months of continued strong job growth. We have seen wages continue to go up, a little bit slower pace than in the past. But that may not be such a bad thing. It looks like unemployment has also remained relatively low. There are, however, some weaker signals, let's say, within this report, including the fact that the labor force participation rate declined.

And, of course, the jobs market is not the only set of indicators that we look at right now. As you just pointed out, there are a lot of other mixed signals that we're getting from elsewhere in the economy on inflation, on output, on housing and other sectors.

Judy Woodruff:

Well, let me ask you about the strong part of this first. And that is the jobs. Why are we seeing this hike in hiring continuing month after month?

Catherine Rampell:

Well, employers are eager to hire. And they are having difficulty, in fact, finding enough people to put onto their payrolls.

In the most recently available data on vacancies, it looks like there are about twice as many job openings today, or at least as of a couple of months ago, as there are unemployed workers available to fill those openings. So there is still very strong demand for workers, because the economy is still recovering.

Again, despite those concerns about recession — and it may still be imminent — I don't want to downplay that — for now, it still looks like employers are very eager to get more people onto their payrolls.

Judy Woodruff:

Well, you mentioned — as you mentioned, wages are continuing to rise.

But let's talk about — you mentioned the weaker signals here. What would concern you the most? What should concern us the most?

Catherine Rampell:

Well, we don't have the inflation data, the Consumer Price Index data yet for the month of June.

The real worry is that, once again, we will — when those numbers come in, we will see that, in real terms, that is, inflation-adjusted terms, workers' wages went down. That is, workers are seeing more dollars in their paychecks, but those dollars aren't stretching as far. And, as a result, their standards of living are in fact deteriorating.

So, on the one hand, it is nice to see, I'm sure, that wages are rising, at least in nominal terms. If that pace of wage growth does not keep up with inflation, then it doesn't mean all that much to the typical American.

Now, the fact that wage growth is slowing, at least in nominal terms, may not be the worst thing in the world, if you're worried that the economy is overheating. There's this fear that members of the Federal Reserve, for example, and other economists have that you could end up in this bad state of the world known as a wage-price spiral, where, basically, workers are demanding higher wages to keep up with the cost of living, and so companies raise prices to be able to pay their workers more, and it feeds on itself.

You don't want to end up in that state of the world. So, if you do see wage growth cooling a little bit, then maybe that should allay some of those concerns about an overheating job market or an overheating economy.

Judy Woodruff:

So, in terms of a recession, that conversation has been out there.

You're saying it's not happening right now. But you're saying it's still a very real possibility?

Catherine Rampell:

Yes, I think the risks of a recession again, even if it's not right now, have risen quite a bit in the last few months.

And that's because we have been hit with a number of unlucky shocks, things like a war, which obviously has other, more tragic, serious consequences, but that's also increasing the cost of oil, food, other kinds of commodities, an avian flu, the lockdowns in China that are finally abating, as well as some other risks on the horizon, things like there are labor negotiations at the West Coast ports.

And, historically, those have led to some disruptions, whether an outright strike or a slowdown, that, if that goes out, that could also disrupt fragile supply chains and drive inflation higher. All of those kinds of factors would raise price growth and cause the Fed to try to stomp on the brakes a little bit more aggressively.

And that's the real risk here, that, if the Fed needs to slam on the brakes, then they may not just dampen demand. They may accidentally tip us into recession. And that's obviously an outcome that nobody wants.

Judy Woodruff:

And, clearly, what you're saying is, this complicates the job of the Fed. Already…

Catherine Rampell:

Yes.

Judy Woodruff:

It's already tricky. It gets even trickier.

Catherine Rampell joining us on this Friday afternoon.

Thank you, Catherine.

Catherine Rampell:

Thank you.