Recession Yet? The Jobs Report for July, 2022


By FRANK STRICKER

In July, the official Bureau of Labor Statistics unemployment rate fell to 3.5%. It has not been that low since the first months of 2020 before the pandemic began. But unemployment rates were still quite high for African Americans (6%), teens (11.5%), and especially for black teens (20.3%).

1. Why Aren’t Even More People Working?

Including hidden unemployment, the National Jobs for all Network found that real unemployment was 9.1%. (See the accompanying chart.) Even in this booming labor market, there are still part-timers who cannot find full-time work and a lot of other job-wanters who are not actively searching because they are not confident of finding a decent job, or they cannot make child-care arrangements, or they still fear COVID infections at work. More broadly, it is a fact that for many decades American job quality, in terms of pay, benefits, worker participation, and leave and child-care policies, has been lousy. The pandemic, federal policies, the Great Resignation, and unionization drives have not yet changed underlying structures very much.

But there are still a lot of job openings. For months employers have reported a large number of job vacancies, and they did so again in June. The number has fallen, but not much. Total job openings reported by employers were 10.7 million. That’s very high. In fact, pandemic levels of vacancies are unprecedented in the twenty-two-year history of the statistic.

Current vacancy numbers could include a lot of catch-up from so-called labor shortages. And employers may be listing more openings than they really need, driven by past difficulties in getting workers. If employers come to feel that there will be a significant recession with reduced business activity, they will cut the number of job offerings. It will be interesting to see if there is evidence of this in the next job vacancy report on August 30.

2. Real Wages Lag

For two years, employers have been eager to hire. So, money wages (what’s on your paycheck) have been rising. But most workers cannot keep up with inflation. For rank-and-file workers, hourly, after-inflation pay was 3.1% less in June of this year than a year ago. Consumer prices last month were up 9% for the year. Workers aren’t getting rich off inflation.

3. Are We in a Recession?

We won’t know for awhile. The total output of the U.S. economy fell a bit in the last two quarters, but such a decline is not the official definition of a recession. A private firm, The National Bureau of Economic Research, weighs a bunch of factors, and it takes time for them to make a decision. But it will be hard for any agency or politician to assert that we have been in a recession when we have had solid increases in job totals this year. In July, 528,000 non-farm jobs were added. Since December of 2021, we added 3.3 million non-farm jobs. That’s no recession.

But some experts and Federal Reserve policy makers don’t want more jobs. They want fewer. They want more people desperate for jobs and willing to work for less than they expect to be paid now. If the Fed succeeds, we will get a real recession.

4. Could Government Authorities Cut Inflation Rates without Sending the Economy into Some Kind of Recession?

There are ways, but most economists don’t seem to be interested in discussing such alternatives. I am not an economist, but I have been an historian of the economy. I was dismayed to find that over many decades, the experts expended little energy to find softer ways than higher unemployment to tame inflation. Today, many economists–including the informative liberal Paul Krugman–are happy that the Federal Reserve is jacking up interest rates to raise unemployment, scare workers, and cut wage increases.

Better methods would include some of the things that the Biden Administration is doing. Government fixes (releasing oil from the nation’s emergency reserve), along with general economic forces, have begun to bring gas prices down. Price controls in selected areas of the economy could help. Just-passed legislation giving Medicare more power to bargain over drug prices will eventually help.

5. Goodbye to the Great Resignation

Higher unemployment–the goal of current monetary policy–will weaken the bargaining leverage that many workers gained during the pandemic. That is the point of Fed policy. Control inflation with pressure on wages, not on prices.

As we move through the next few months, there will be less evidence of the Great Resignation. Fewer workers will stay on the sidelines waiting for better offers. Fewer will be able to quit their jobs with confidence that they can find something else pretty easily. And the best chance for real wage gains since the late 1990s may evaporate before inflation, which is eating away at rising wages, is brought under control. And if policy aims first to cut wage increases, why expect something better?

Frank Stricker is on the Board and Executive Committee of the National Jobs for All Network and is a member of Democratic Socialists of America (DSA). He taught history and labor studies for many years at California State University, Dominguez Hills. His book, American Unemployment: Past, Present, and Future (2020), shows that excessive unemployment, not full employment, has been the rule for much of the last century and a half.

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