Five weeks ago, when the Commerce Department reported that the inflation-adjusted gross domestic product dipped in the second quarter, the House Republican Leader, Kevin McCarthy, declared, “This morning the government announced what every American has been feeling for nearly a year—we are in a recession.” At the White House that day, Joe Biden pushed back. Pointing to continued job growth and an expansion in manufacturing, he said, “That doesn’t sound like a recession to me.” Score one to the old guy in the aviator sunglasses.
On Friday morning, the Labor Department issued its monthly survey of payrolls, which indicated that employers added another three hundred and fifteen thousand jobs in August, following again of five hundred and twenty-six thousand jobs in July. The Labor Department’s accompanying survey of households indicated even stronger job growth last month: four hundred and forty-two thousand. The unemployment rate, which is based on this second survey, ticked up a bit, from 3.5 per cent to 3.7 per cent. But in this case, the rise in unemployment reflected stronger economic activity rather than job losses. In August, a whopping seven hundred and eighty-six thousand people entered or reëntered the ranks of those working or actively looking for work, and the labor-force participation rate ticked up to 62.4 per cent.
To put it gently, economies that are in recession do not behave in this manner. Far from plunging into a slump over the summer, the U.S. economy created more than 1.1 million jobs since the end of May. Over the past year, total employment has risen by 5.8 million. After the jobs report was released, Biden didn’t exactly do a victory lap around the White House Ellipse, but at an event to promote business investment he did hail its contents. “The great American jobs machine continues its comeback,” he said. “With today’s news, we have now created nearly ten million new jobs since I took office. Nearly ten million jobs, the fastest growth in all of American history.”
As always, the monthly report should be placed in a broader context. Taken over all, it’s still clear that the economy has slowed down appreciably from last year, when it expanded at the fastest rate since 1984, as pandemic shutdowns ended. The August employment update also confirmed that wages are rising more slowly than inflation, which implies that workers’ purchasing power is falling. Furthermore, nobody can be sure what will happen in the coming months. As the Federal Reserve continues to raise interest rates to bring down inflation, there remains a serious danger that its actions will tip the economy into a genuine slump. These concerns explain the fall in the stock market over the past couple of weeks. (On Friday, the Dow fell further as investors digested the jobs report.)
But the Republican claim that the economy is now in recession lacks credibility. If it were true, the signs would be visible in cyclical sectors like construction, retail, and temporary services. Instead, the payrolls survey showed that all three of these sectors added jobs in June, July, and August. Other reports also point to continued expansion. With gas prices falling, consumer confidence rose in August, according to the Conference Board, a business research group. The Federal Reserve of Atlanta’s G.D.P. Now model shows annualized G.D.P. growth in the three months from July to September tracking toward 2.6 per cent, which would represent a rebound from the previous two quarters.
This being an election-campaign season, there is no possibility that the Republicans will acknowledge that they got it wrong, of course. On Friday, McCarthy didn’t immediately react to the new jobs report; neither did Senator Lindsey Graham, of South Carolina. The G.O.P. response was left to Representative Kevin Brady of Texas, the senior Republican on the House Ways and Means Committee, who issued a statement saying that because of the “Biden recession and crushing inflation, more Americans are being forced back into the workforce to survive.”
Give Brady credit for ingenuity, at least. For the past couple of years, there have been concerns that, because of the lingering effects of the pandemic, many Americans would never return to work, or even to looking for work. The latest payrolls report alleviated these concerns. It showed that, for the first time, total employment has exceeded its pre-pandemic peak of 152.5 million, and now stands at 152.7 million. To repeat: the economy has recovered all the jobs that were lost to the coronavirus, and then some. Because of population growth since the start of 2020, there is still room for further job gains, especially among younger and older Americans. But in the prime-age workers demographic—those aged twenty-five to fifty-four—the percentage of people employed is now virtually back to its pre-pandemic level: 80.3 per cent in August, compared to 80.5 per cent in February of 2020.
These are encouraging developments. Unless, of course, you are a Republican politician running on the claim that the economy has gone to hell. ♦