August 10, 2022
These Charts Show Why We Might Not Be Bearish

The US economy is in recession, so someone forgot to mention the job market.

The employment picture in the last six months is nothing like the economy in recession but creating jobs at a rapid pace of about 460,000 per month.

Research by CNBC’s Steve Lysman indicates that during a typical recession, the employment picture would be much more bleak, losing ground rather than gaining. Several charts presented during Wednesday’s “Squawk Box” help paint the picture.

The CNBC team looked at economic data going back to 1947. It indicated that when GDP has been negative for six months, as was the case with 2022, payrolls fall by an average of half a percentage point. But this year, the job numbers have actually increased by 1%.

Data from human relations software company UKG supports that notion, with internal data showing jobs created in line with what the Bureau of Labor Statistics counts.

Finally, the Dallas Federal Reserve, in research posted on Tuesdaysaid its analysis of several data points found that “most indicators – particularly those measuring labor markets – provide strong evidence that the US economy did not enter recession in the first quarter of the year”.

Central bank researchers observed that one data point was the actual personal consumption expenditure. They found that consumption generally declined during recessions. In contrast, measurements increased during the first half of 2022.

Even with other evidence suggesting otherwise, many commentators have focused on the traditional definition of recession as two straight quarters of negative GDP growth. It declined 1.6% in the first quarter, and fell 0.9% in the second quarter, meeting that standard.

Another odd factor about the current situation is that even though GDP fell in real inflation-adjusted terms, the economy grew strongly on a modest basis during the second quarter. nominal GDP It grew by 7.8% during the period, but was higher than the 8.6% quarterly inflation rate.

In contrast, during the previous recession in 2020, nominal GDP contracted by 3.9% in the first quarter and 32.4% in the second quarter, while real GDP declined by 5.1% and 31.2%, respectively.

St. Louis Fed Chairman James Bullard also told CNBC during a “squawk box” that he doesn’t think the economy is in recession, though he was more disappointed by the decline in the second quarter.

“I think the slowdown in the first quarter … was probably a temporary one, but the second quarter was more worrying,” he said. Even if some rate-sensitive pockets of the economy are slowing, “it doesn’t mean you’re in a recession, just because you see some negative signs in some parts of the economy.”

The latest data on the jobs picture comes out Friday, when the Bureau of Labor Statistics is expected to report payroll gains of about 258,000 for July, according to Dow Jones estimates. BLS data from earlier this week showed that the gap between job openings and available workers is still huge, but small.

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