Fears of a recession are looming, but that has done nothing to stop the sizzling hot job market! The June Bureau of Labor Statistics reported non-farm payrolls grew by 372,000, far above the 265,000 number that economists predicted. The unemployment rate is now at a historically low 3.6%.
So why is this market so hot and what does it mean for Employers and Employees alike?
Essentially employees are in the “driver’s seat” with a high number of voluntary departures and plentiful job openings. According to CNBC Financial Reporter Greg Lacurci, the Great Resignation is still in full swing. Nearly 4.3 million workers voluntary left their jobs in May. Though it is showing some signs of leveling off. According to Senior Economist of Glassdoor, Daniel Zhao “Overall, this doesn’t look like a job market about to tip into recession. Labor demand is still extremely hot, and even if things are cooling from white-hot, they’re still red-hot.” The uptick in job growth surprised analysts who had expected a slowdown. The U.S. economy has now replaced all of the jobs that were lost in the early months of the pandemic. The strength of the job market is in contrast with other economic indicators, which show the U.S. economy shrinking during the first six months of the year. That’s often a sign of recession, but many observers find that hard to reconcile with an economy that’s added more than 3 million jobs this year.
As an employer it is important to note there are indications things may cool — though it’s unclear how much and how quickly. The Federal Reserve is raising borrowing costs for consumers and businesses in a bid to slow the economy and tame stubbornly high inflation. What’s more, the latest inflation reading came in hotter than expected, and the latest retail sales data was weaker than anticipated, “We know quite explicitly the Federal Reserve is trying to cool down the economy,” Zhao said. “One of the places that’s going to happen is in the labor market. It is also imperative to keep in mind the inflation that households are seeing right now, that might encourage some workers to come back into the workforce. “Things might slow down as the labor market cools, but for right now we’re still very much in the Great Resignation,” he added.