With the release of new employment data from the Bureau of Labor Statistics today, most commentators have focused on the big gains seen in the total number of jobs as reflected in the establishment survey. According to that survey, total nonfarm jobs reached 152 million which—30 months later—finally puts total jobs back at their pre-covid peak during January and February of 2020. This was hailed as an enormously strong jobs report by many observers.
But the grand employment successes indicated by the establishment survey are not reflected in the household survey which, rather than measuring total nonfarm jobs, measures “total employment” or employed people. In that case, employed persons are about a half a million jobs below the February 2020 peak, but the more worrying trend is in the fact that total employment has been flat for the past four months. total employment was 158 million in March 2022 according to the survey. In July, it was also at 158 million.
That’s quite a difference between the two employment surveys. The establishment survey shows that since March total jobs have grown by 1.68 million while total employment has fallen by 168,000. That’s a difference of 1.8 million.
This suggests that the total number of jobs is growing, but the total number of employed people is not. In other words, people are taking more second jobs, but more people aren’t employed.
Employment weakness also shows up in the labor force participation rate (for the 25-54 age group, excluding most retirees) which remains below the 2020 peak, and also below where it was for the entirety of the period from the late 1980s to the 2008 financial crisis.
The overall narrative for the most recent employment data, however, was that jobs are “smashing” expectations and that the labor market is red hot. Yet, it’s apparently not hot enough to bring the working-age labor force back to where it was before the GFC. Nor is it hot enough to bring total employment back up to 2020 levels.
Theoretically, this sort of thing could always be explained by the idea that household earnings are so strong that many workers simply don’t need to work anymore. That is surely true in some cases, but we also know that the savings rate is falling while debt is mounting.
For example, after surging to historically high levels in 2020—thanks largely to stimulus checks and people putting off recreation and vacations—the personal savings rate has collapsed since December of last year. As of June, the personal saving rate is at 5.1 percent, which is the lowest since 2009.
Moreover, household debts are mounting as well. According to the Federal Reserve consumer debt and revolving credit have grown rapidly since March of 2021, and are now at a new high and in July was up more than 17 percent year-over-year. Other data suggests consumers are still doing plenty of spending, but many are apparently doing it using consumer credit and at the expense of savings.
This is not shocking since wages are not keeping up with the CPI inflation rate.
What does all this mean for the economy? It suggests neither collapse nor robustness. The fact that employment data tends to be a lagging indicator, however, means the employment data probably doesn’t mean much in terms of telling us where the economy is headed. Many economists and policymakers are busy debating semantics and whether or not the call the current situation a recession. But falling real wages, high inflation, rising debt, and two quarters of negative GDP growth suggest falling standards of living, which is mostly what matters.
