If the US economy is in a recession, someone forgot to tell the labor market.
The employment picture over the past six months is not behaving like any economy in a downturn, instead creating jobs at a rapid pace of close to 460,000 per month.
Research by CNBC’s Steve Liesman suggests that during a typical downturn, the employment picture will be much bleaker, losing ground rather than gaining. Several diagrams were presented during Wednesday’s “Squawk Box” to help paint the picture.
The CNBC team looked at economic data going back to 1947. It noted that when GDP has been negative for six months, as in 2022, salaries fall an average of 0.5 percentage points. But this year, the number of jobs increased by 1%.
Data from human relations software company UKG supports this idea, with internal data showing job creation in line with Bureau of Labor Statistics statistics.
Finally, the Dallas Federal Reserve, in research published Tuesday, said that its analysis of multiple data points found that “most indicators – particularly those that measure labor markets – provide strong evidence that the US economy did not fall into a recession in the first quarter.” of the year.
One of the data points that central bank researchers looked at was real personal consumption expenditures. They found that consumption generally declined during recessions. By contrast, the scale increased during the first half of 2022.
Even with other evidence to suggest otherwise, many commentators have focused on the traditional definition of a recession as two consecutive quarters of negative GDP growth. The first quarter fell 1.6%, and the second quarter fell 0.9%, meeting this benchmark.
Another anomaly about the current situation is that although GDP declined in terms of real inflation rates, the economy grew strongly during the second quarter. Nominal GDP rose 7.8% during this period, but was outpaced by the quarterly inflation rate of 8.6%.
By contrast, during the last 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 President James Bullard told CNBC, also during the “Squawk Box,” that he doesn’t think the economy is in a recession, although he was even more dismayed by the second-quarter slump.
“I think the slowdown in the first quarter…maybe it was just a coincidence, but the second quarter was more worrying,” he said. Even if some interest rate-sensitive pockets of the economy slow down, “it doesn’t in and of itself mean you’re in a recession just because you see some negative signals in some parts of the economy.”
The latest data on the jobs picture was released on Friday, when the BLS is expected to report a job gain of about 258,000 for the month of July, according to Dow Jones estimates. BLS data earlier this week showed that the gap between available jobs and available workers remains wide but is trending downward.