(Brinker) As we know, the July jobs report came in much stronger than expected, with the US economy adding 528,000 jobs last month vs. Wall Street’s estimate for 250,000 new jobs. For now, despite two consecutive quarters of slightly negative GDP growth, the jobs report has quieted talk – at least a bit, it seems – of the US economy being in recession.
The other important data point that the July jobs report delivered is that, with the economy adding those 528,000 new jobs, the US labor market has fully recovered from its pandemic-driven collapse of 2020. To put a finer point on it, when the US economy was shut down in early 2020 in an attempt to mitigate the spread and impact of the coronavirus, our labor market imploded, with 22 million jobs disappearing as total US employment fell from 152,040,000 to 130,513,000 and the unemployment rate shot up to 14.7%. Now, two and a half years on, those 22 million jobs – and a few more – have been clawed back, with total US employment in July coming in at an all-time high of 152,536,000 (see chart). And total US GDP is also well above its pre-pandemic high of $21.7 trillion, most recently clocking in at approximately $24.9 trillion on a seasonally adjusted basis.
While not linear, and not without its ongoing challenges, the recovery of the US economy has been extraordinary. And speaking of challenges, at the top of that list sits historically high inflation, which is being driven, in part, by wage inflation, as employers continue to compete for employees. Which brings us to another important data point that the July jobs report delivered and that is the labor force participation rate, or what percentage of the civilian population 16 years and older is working or actively looking for work. For July, that number came in at 62.1%, down from 62.2% in June and well below its pre-pandemic level of 63.4%.
Two things drive economic growth – productivity and people. For the US economy to generate consistent growth with a reasonable level of inflation, we will likely need to see labor force participation move higher over time.
