The May jobs report was released on Friday, and the good news is that US Added 390,000 Jobs in May as Hiring Remained Robust:
U.S. employers added 390,000 jobs in May, extending a streak of solid hiring that has bolstered an economy under pressure from high inflation and rising interest rates.
Last month’s gain reflects a resilient job market that has so far shrugged off concerns that the economy will weaken in the coming months as the Federal Reserve steadily raises interest rates to fight inflation. The unemployment rate remained a low 3.6% in May, just above a half-century low, the Labor Department said Friday.
Stock market futures fell Friday after the government released the jobs report, reflecting concern that job growth in May was high enough to keep the Fed on track to pursue what’s likely to be the fastest series of rate hikes in more than 30 years.
Note: The investor class aka the predator class only cares about the cost of borrowing money. They don’t risk their own money, they borrow money to invest. And for a number of years the cost of borrowing money has been at or near zero – essentially free money. Now that the interest rate will slightly eat into the profit margins on their investments, these greedy Wall Street predators are having a sad. They want the free money to which they have become accustomed.
Businesses in many industries remain desperate to hire because their customers have kept spending freely despite intensifying concerns about high inflation. Americans’ finances have been buoyed by rising pay and an unusually large pile of savings that were accumulated during the pandemic, particularly by higher-income households.
Workers, in general, are enjoying nearly unprecedented bargaining power. The number of people who are quitting jobs, typically for better positions at higher pay, has been at or near a record high for six months.
In May, Friday’s jobs report showed, more Americans came off the sidelines of the workforce and found jobs, a sign that rising wages and plentiful opportunities are encouraging people to look for work.
Average hourly wages rose 10 cents in May to $31.95, the government said, a solid gain but not enough to keep up with inflation. Compared with 12 months earlier, hourly pay climbed 5.2%, down from a 5.5% year-over-year gain in April and the second straight drop. More moderate pay raises could ease inflationary pressures in the economy and help sustain growth.
Nearly every large industry added workers in May. One major exception was retail, which shed nearly 61,000 positions.
Construction companies added 36,000 jobs, a hopeful sign for Americans who have bought new homes that aren’t yet built because of labor and parts shortages. Shipping and warehousing companies, still struggling to keep up with growing online commerce, added 47,000 jobs. Restaurants, hotels and entertainment venues hired 84,000.
The New York Times adds, Hiring Remains Strong Even as Fed Tries to Cool Economy:
After the strong rebound from the depths of the coronavirus lockdowns — all but 800,000 of the 22 million jobs that were lost have been recovered — the Fed has shifted its emphasis from maximum employment to its other mandate: price stability. The challenge is to apply its primary tool, a steady series of interest-rate increases, without inflicting a recession.
“I think we’re on sort of what looks like a glide path right now, and that’s good — nothing’s broken,” said Guy Berger, the principal economist at the career-focused social network LinkedIn. “But keep fast-forwarding it a year and the question marks are still big.”
The closely watched indicators include the impact on wages, which have been increasing at a pace not seen in decades, though not enough to keep up with inflation over the past year. The Fed is worried that rising labor costs will be passed along to consumers.
On that score, the Labor Department report showed little change in trajectory. Average hourly earnings rose 0.3 percent from the previous month, the same pace as in April, and were 5.2 percent higher than a year earlier, compared with a 5.5 percent year-over-year increase in April.
“It’s moderating, but it’s not moderating to a level, I think, where it’s consistent with the Fed’s inflation goals,” said Michael Feroli, chief U.S. economist at J.P. Morgan, said of wage growth. He said the Fed would probably want wages to cool toward an annualized 3.5 percent pace, at the higher end, a rate that officials view as aligned with 2 percent inflation.
[T]he continued job gains are among many indications of a vibrant economy. Reports from the nation’s largest banks show checking accounts are still above 2019 levels for nearly all income groups. New bankruptcies and debt-collection proceedings are both at their lowest levels since tracking began in 1999.
The Washington Post editorialized, We’re in the midst of a ‘great return to work.’ It’s worth celebrating.
The biggest vote of confidence in the U.S. economy is business continuing to hire at a strong rate and Americans continuing to return to work. The United States added back 390,000 jobs in May, once again beating expectations. Nearly every industry saw net employment gains, except for the retail sector. And more and more Americans are looking for jobs again — and getting them.
The past year has been dubbed the “Great Resignation” due to tens of millions of people quitting their jobs and, usually, finding another one quickly with higher pay or better work-life balance. But the past year could just as easily be called the “Great Return to Work.”
More than 6.5 million jobs have come back in the past year, one of the greatest employment rebounds in U.S. history. Women and minorities have made especially large gains. For all the concerns about the “She-cession” early in the pandemic, women have come surging back into the workforce in recent months, especially as schools and day cares have reopened. Women’s labor force participation, especially for ages 25 to 54, has now recovered as much as men’s. And the share of African Americans working is almost back at a two-decade high.
The massive return to work was somewhat predictable as the economy reopened and many Americans were vaccinated against the coronavirus. As the risks receded, people felt safer to venture out again for work and fun activities. But the pace of the job recovery — and its enduring strength — have exceeded many forecasters’ expectations. Nearly every town has visible “we’re hiring” signs, and there are nearly two job openings for every unemployed American. This is largely due to the historic $5 trillion in aid the federal government sent out during the crisis. All that extra cash fueled buying sprees that led to record corporate profits and record numbers of job openings.
[T]he reality is that 96 percent of the jobs lost in the 2020 recession are back and many companies no longer see as much urgency to hire. But the past year has made a huge difference to millions of families that now have higher incomes and renewed careers.
It took more than six years to recover from the Great Recession. By comparison, this jobs recovery is on track to take about 2.5 years [origjnally projected to take into 2024] That’s worth celebrating.
Catherine Rampell adds the FED is aiming for The Goldilocks economy: Trying to get it ‘just right’:
When it comes to hiring, it’s a good thing for there to be lots of job opportunities for workers — particularly workers who usually don’t have much bargaining power. It’s a good thing for employers to be offering higher wages, especially for the lowest-paid, least-desirable jobs. It’s a good thing for businesses to be posting tons of job openings, especially when roughly 22 million jobs were destroyed very early in the pandemic.
Lately, as the May jobs report released on Friday shows, we’ve had these good things in spades.
We have now nearly filled in the deep jobs hole created by the pandemic. If May’s pace of employment growth (390,000 jobs added) continues, we’ll be back to the pre-pandemic level of employment in another two months or so. That would be much sooner than (nearly) anyone predicted.
Again, a good thing! Especially compared to the painfully slow recovery after the Great Recession.
But as with all things Catherine Rampell, she has a caveat.
While we want a hot economy, and a hot labor market, there is also such a thing as “overheating.”
This could happen, say, because consumers have tons of cash to spend, and want to spend it (again, usually good things) — but suppliers can’t keep pace with customers’ super-strong demand for goods and services. They don’t have the capacity to scale up quickly enough. That mismatch can lead to rapidly rising prices and shortages of products. It can also manifest through shortages of workers, if businesses are trying so hard to scale up that they want to hire more people than are able or willing to work.
That has been the case for about the past year: Since May 2021, there have been more job vacancies posted at the end of each month than there were idle workers actively looking for jobs. In April 2022, the most recent month of data, there were about twice as many job openings as there were unemployed workers.
So even if every single unemployed worker suddenly got a job, there would still be tons of positions going begging.
And as with all things Catherine Rampell, she parrots the Wall Street talking points (blame worker’s wages):
One risk in a situation like this is a wage-price spiral. This occurs when companies chasing scarce workers decide to raise wages (again, usually good), but the resulting higher labor costs cause the companies to raise the prices they charge their customers. That, in turn, prompts workers — who, of course, are also consumers — to demand even bigger raises, which causes more price increases, and so on.
There has been some debate (excerpt below) about whether we could be headed toward (or are already in) one of these dreaded spirals. There has also been debate over whether the Federal Reserve needs to act more aggressively to break or prevent such a cycle — specifically, by raising interest rates much more sharply than it already is doing.
Economist Joe Brusuelas at consulting firm RSM said workers simply don’t have the clout to push wages higher and higher. He said that the tight labor market — driven principally by pandemic-induced labor shortages and demographic shifts — is the main cause of wage increases right now.
“This is not a wage-price spiral linked exclusively to inflation in the way in which we saw during the 1970s,” said Brusuelas. At that time, labor unions represented approximately 1 in 4 American workers.
“Back when unions played a much larger role in the economy, many contracts were tied to inflation,” Brusuelas continued. “In the late ‘70s, the United Mine Workers were able to extract almost a 12% increase in pay — in one year — linked specifically to inflation.”
Brusuelas pointed out that while retirees on Social Security receive automatic annual cost-of-living adjustments now, very few workers do.
He said companies have been able to pay higher prices for supplies, and higher wages to attract workers, without hurting their profit margins. To him, that’s evidence the pressure to raise wages isn’t hurting employers or the economy.
Meanwhile, that pressure is helping lower-income workers whose wages have lagged for decades. “What we’re seeing is a resetting of wages — especially for lower-income cohorts,” Brusuelas said. “The working class, the poor and the lower strata of the U.S. middle class are seeing wages go up.”
“Higher wages are a good thing in the American economy and not to be feared,” Brusuelas continued. “We do not have a classic wage-price spiral, and that can’t be repeated often enough.”
[In] April, Fed Chair Jerome H. Powell referred to the labor market as “too hot. It’s unsustainably hot.” He added that “It’s our job to get it to a better place where supply and demand are closer together.”
But that doesn’t mean he wants hiring or economic growth to come to a halt, obviously, or for the economy to crash. What he and other policymakers have been looking for — what could help them avoid having to raise interest rates more drastically — is sometimes called the “Goldilocks” economy: not too hot, not too cold. Just warm enough. Just right.
Powell and others have acknowledged that getting and staying on that “just right” path would be challenging. But at least based on the jobs report released on Friday, there is reason for optimism.
For all the media fear mongering about a recession – I would point out that until we recover every job lost during the Pandemic we are still not officially out of the Pandemic Recession, we still have 800,000 jobs to go – bank economists (the people who actually get paid to know, unlike reporters who know nothing about economics) are not as concerned about a reccession. American Bankers Association predicts US will avoid recession this year:
The ABA’s Economic Advisory Committee announced its updated economic forecast on Friday. The group of economists predicts 1.6% inflation-adjusted growth this year and 1.5% growth in 2023. While still well below last year’s red-hot 5.5% gains, the prediction keeps U.S. growth in the black.
[Fed] Chairman Jerome Powell is trying to pull off a so-called “soft landing,” which is when the central bank is able to drive down inflation while preventing a recession and a surge in unemployment.
Many economists define a recession as two consecutive quarters of negative GDP growth, so Friday’s ABA forecast is a welcome prediction as it shows positive GDP growth this year. This year’s quarter 1 real GDP growth was negative 1.5%, but the ABA predicts 2.7% growth this quarter and in the third quarter.
“Broadly speaking, the best way to think about this is, I think, a successful soft landing,” said Richard DeKaser, the committee’s chairman and the executive vice president and chief corporate economist at Wells Fargo, during a Friday call.
The ABA is also forecasting that inflation will remain well above the Fed’s 2% target this year. It expects Consumer Price Index inflation to fall to a 6.3% annual rate in quarter 4 of this year. It predicts that headline figure will decline to 2.4% by the final quarter of 2023.
The ABA isn’t alone in its prediction of Powell and the Fed managing a soft landing. In a recent report, the Congressional Budget Office also forecast continued economic expansion this year. The nonpartisan budget office indicated that U.S. real GDP would increase by 3.1% this year.
So the word of the day is “PATIENCE” – it takes time to unwind the effects of a global pandemic and the resulting economic disruptions, compounded by Vladimir Putin’s illegal war of aggression against Ukraine and his using Russian oil and Ukraine’s grain to wage war against the rest of the world.
We are all pissed off about the high price of gasoline. The government has nothing to do with this. There is still plenty of oil on the world market without Russian oil. The problem is a lack of refining capacity. American producers shut down a number of refineries and have not invested in new refineries because of investor demands. U.S. oil refiners’ margins smash records, but few plan to build more plants (except):
According to the Energy Information Administration, the United States will be using about 95% of its refining capacity in June. Yet, we’re refining about a million barrels per day less than we were just a couple of years ago.
When COVID-19 hit and demand for fuel fell dramatically, a lot of refining companies shut plants down, he said.
“Some refineries just shut down because of lack of demand, and they’re not coming back on. Then there was some weather-related issues also,” Daigle said. Last year’s freeze in Texas knocked several refineries offline, and some are still not operating at full capacity.
[Hurricane season is upon us and a hurricane from New Orleans to Houston could knock refineries off line and drive gas prices even higher. A hurrican is an act of God.]
But if refiner’s margins are so big and they’re making a killing on every barrel of fuel they get to market, why don’t energy companies just build more refineries while the money’s there?
It takes a lot of money and time to build refineries. Additionally, “investors do not want to see companies pouring money into organic oil and gas growth,” Gabelman said.
The long-term prospects for fossil fuels are uncertain. Most investors don’t want to be asked to chip in for long-term growth. In the present economic climate, they’re demanding a quicker return on their investment.
So don’t blame the government for high gas prices, it is because of the business practices of Big Oil and the demands of the greedy investor class aka predator class.
Despite the projection of a soft landing this year, the ABA economists emphasized the high degree of uncertainty surrounding the country’s economic recovery and assigned a 40% chance of the economy entering a recession in 2023.
“It looks like the Federal Reserve will successfully bring inflation down to more tolerable levels in the foreseeable future,” said DeKaser. “However, there are substantial risks to this outlook.”
Goldman Sachs predicts a 35% chance of a recession in the next two years, while Wells Fargo’s economic model projects a 30% chance of a recession occurring in the next six months alone.
A Democratic President has not had a recession since the post-World War II recessions on 1945 and 1949 under Harry Truman. Every recession since has occurred under a Republican president. So unless you elect Republicans to Congress – who know nothing about economics – to enable them to sabotage the Biden administration, the historical odds are good that there will not be a recession next year.