Despite constant talk of a recession, businesses are still seeking workers.
To the surprise of many economists, the Bureau of Labor Statistics reported this morning that 528,000 new jobs were added in the month of July, double what analysts expected. The leisure and hospitality industries led the surge.
Labor demands remain higher than the number of available workers. Businesses are desperately needing labor, despite clear signs that the economy is slowing.
Many businesses in the U.S. have seen demand for goods and services cool as inflation has risen. On top of that, the Federal Reserve has increased interest rates, making corporate borrowing and spending more expensive.
Because of those and other factors, the U.S. economy shrank at an annual rate of 0.9% from April through June, marking the second consecutive quarterly contraction and raising concern among economists that a recession is near.
Despite all this, the labor market has continued to grow at a fast pace, standing out as a source of strength for the overall economy. The U.S. economy added a robust 528,000 jobs in July alone, sending payrolls slightly beyond their pre-pandemic level, and the unemployment rate ticked down to 3.5%.
Despite consumer demand slowing down, the supply of workers to make goods and provide services has been considerably below companies’ needs. Even though the economy is slowing, companies are still short of workers.
“Labor demand is strong enough that workers who are losing their jobs are likely to find new ones much faster than in a typical downturn,” Comerica Bank chief economist Bill Adams told The Wall Street Journal. “That will largely interrupt the vicious cycle of a recession where job losses trigger cutbacks in consumer spending and less revenue for businesses, which forces additional layoffs.”
U.S. job postings fell in June to the lowest level in nine months, but the total is still historically high and well above the number of unemployed people seeking work, according to the U.S. Labor Department. Fewer workers are seeking jobs than before the pandemic hit. Postings on the job site Indeed.com were 52.5% above pre-pandemic levels in late July.
Many small businesses are being hit the hardest with the labor shortages. “Small businesses are struggling to compete with larger employers on pay and benefits and cite a lack of qualified workers,” says Joe Wall, National Director of Goldman Sachs 10,000 Small Businesses Voices.
