This is not your grandfather’s labor market. On paper, we just ended a 27-month streak of unemployment below 4%, surpassing several of the post-World War II economic boom years. But in the real world, the entire job growth streak was a mirage. In fact, as it relates to full-time employment for American-born workers, we have been in a labor market recession for years, and with inflation, it will only get worse.
If you’re not feeling a vibe of postwar peak American exceptionalism, you’re not missing anything. Once again, the Bureau of Labor Statistics published a jobs report last week showing robust growth of 272,000 jobs for May, while census data from the Household Survey showed just the opposite. The Household Survey actually showed 408,000 fewer people with jobs, with an additional 250,000 no longer in the labor force, despite the working-age population growing by 182,000. So rather than an additional 272,000 jobs as indicated by the Establishment Survey, U.S. Census Bureau data showed 840,000 jobs lost relative to the population.
The job numbers are a classic example of subtraction by addition.
Based on the reality you see among your friends and family struggling with this crushing cost-of-living crisis, which survey do you believe? They can’t both be true. As Bloomberg’s chief economist, Anna Wong, observed:
May’s jobs report presented contradictory views of the labor market, as we expected. The establishment survey shows robust gains in nonfarm payrolls — yet the unemployment rate rose to 4%. We believe the latter currently offers a closer approximation of reality than payrolls, as BLS’ model for estimating business births and deaths — which added 231,000 jobs to the nonfarm-payrolls print in May — is lagging the reality of surging establishment closures and falling business formation.
If you ignore the noise from the Establishment Survey, census data showed an additional 920,000 more unemployed people today than in February 2020, immediately before the COVID-19 catastrophe. The reason the Household Survey better reflects reality is hidden in the numbers specifying the types of jobs being created. The May job numbers highlight the dystopian economic situation: Full-time jobs shrank by 625,000, while part-time jobs grew by nearly 300,000.
Inflation is crushing the economy and shrinking the opportunity for full-time employment, as consumers clamor to find multiple part-time jobs to make ends meet. In that sense, the job numbers are a classic example of subtraction by addition.
The recent labor market trend also shows that native-born Americans lost 663,000 jobs, while immigrants gained 414,000 jobs. To date, employment levels for American-born workers have barely returned to pre-pandemic levels (excluding population growth), whereas the foreign-born job market has grown by over 3 million. Growth is primarily in the government-supported health care sector, with most new jobs going to foreigners.
So not only are we failing to enjoy the benefits of this so-called job boom, but we are also going backward in the labor market and not keeping up with population growth. And frankly, this is what we should expect in an economy in which inflation is crushing producers and consumers alike. With the cost of doing business this expensive, most employers do not have the capital to offer new jobs.
In fact, the only new job growth we are seeing is with multiple part-time jobs because people cannot afford to live on just one full-time job! And neither party will do anything to attack the source of the crushing inflation: deficit spending.
In addition to record annual deficits, a record $9.3 trillion of existing debt will roll over and be refinanced at higher interest rates during the next 12 months. This is creating a vicious cycle in which the Treasury is switching to shorter-term bonds in the hope of paying out relatively lower interest rates. This, in turn, accelerates the rate of maturing debt.
The level of annual debt maturing has already doubled in four years. At the same time, the Federal Reserve, in an ill-fated bid to tame inflation, engaged in “quantitative tightening” by offloading more than $1.5 trillion from its balance sheet. Who will purchase up to one-third of our gross debt maturing every single year? That means interest rates will need to go up even more to attract foreign investors, who are already divesting from U.S. Treasuries.
What is so shocking about the magnitude of our debt is that we are taking in record revenue but still crushed with a debt crisis because we are spending 43% of our GDP, which is higher than during the Great Recession. Revenue is up 10% in the 2024 fiscal year relative to the first eight months of the previous fiscal year, yet we are still running a $1.2 trillion deficit.
What happens when we hit an official recession and unemployment benefits, Medicaid, and food stamp expenditures skyrocket while tax revenues plummet? What does the cycle of debt issuance and interest rates look like then?
Well, consumers are just about tapped out. Credit card debt is at a record high while personal savings are depleted.
Indeed, the days of placing both the public and private debt on the credit card are over. Thus, this job market is nothing like the 4% unemployment days of our grandparents. If this is how bad it is at 4%, wait until the tab comes due with 8%-10% unemployment and debt and interest levels dwarfing those of 2008. The Great Recession will seem like a pleasant memory.
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