The data portends a slowing economy but continued strength for stores
By Joe Higgins, Quest 4 Quality
- The U.S. economy added 315,000 jobs in August vs. expectations of 298,000
- Retailers continue to generate more jobs
- Sales of appliances, furniture and other durable goods increased for the fourth consecutive month
The August jobs report, released last week by the Bureau of Labor Statistics, pegged the number of open positions in the current marketplace at 11.2 million, a two-month increase of 700,000, while the unemployment rate ticked up from 3.5% to 3.7% last month.
This means that two jobs are available for every one person looking for work.
What we are experiencing in this economy is extraordinary. Businesses across America have decided to keep employees on staff while knowing that a recession is possible over the next year. In “normal” times companies try to avoid this cycle by laying off workers, but not today.
The Bureau of Labor Statistics also reported that August’s retail trade jobs grew by 44,000 positions and were up by 15,000 over the prior month alone. This means that consumers are still out and actively spending in retail stores, even though inflation is a drag on the economy.
In addition, sales of all durable goods, which includes appliances, furniture and consumer electronics, have increased over each of the past four months. I mentioned at the AVB Summit in March that Americans were not all going to jump on planes, book rooms at hotels and begin dining out. I said that about 30% would not change their pandemic habits and would still be buying products for the home. And from the reports I am getting, that is precisely what is happening.
In fact, the leisure and hospitality sector added only 29,000 positions in August after growing by 94,000 jobs in July. While travel and other services are up in the U.S., the sector is beginning to slow, which may signal a broader return to home improvement.
Overall, the U.S. economy added 315,000 jobs in August against expectations of 298,000, the report showed. This was a considerable slowdown from the 526,000 jobs created in July but still a very robust performance. The deceleration was expected as rising interest rates are finally impacting the economy.
Normally, I would say that a drop in numbers like this would be a harbinger of troubled times ahead, and many forecasters are still predicting a looming recession. But I believe a slight decrease in job growth could be positive for the economy. Let me put on my empathy hat: losing a job is painful, and I am not saying unemployment is ever a good thing. But many economists think the job market is in a supply-and-demand crisis — there are too many jobs and not enough workers. Businesses will compete for good employees, and they will then demand and get higher wages. A slowdown like we saw last month could help the economy by cooling off the job market and thus taming inflation.
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The big banks and their economists have been predicting for months that we would see a significant rise in unemployment once the pandemic’s massive stimulus spending stopped. The economy was fueled by trillions of dollars given to consumers, small businesses and corporations. The consensus was that there would be consistent layoffs during the year, but this job market has surpassed all expectations despite rising interest rates and a declining housing market.
However, the numbers released last week may predict the inevitable — a slowing job market and a possible recession. After six months of interest rate hikes and their impact on housing and business investments, the resulting jobs report was the most likely result.
Still, one of the brightest signs for our economy and all our dealers looking for employees is that more workers came back into the labor market in August than anticipated. Although unemployment rose two-tenths of a percent, this data point only takes in those job seekers actively looking for work, not those sitting on the sidelines. It indicates that as wages increase and more jobs open, more Americans will return to the workforce.
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The bottom line? The economy is slowing down as the Fed raises interest rates but employment is still very robust. While most economists think we are entering a recession or are already in a one, it is hard to have a recession in the face of the massive availability of jobs in America. So for now, we have to wait and see what the outcome will be over the next few months.
Joe Higgins is a 45-year veteran of GE and Whirlpool Corp. who brings his experience to bear as a business consultant, public speaker, AVB keynoter and YSN contributor. Visit his website, Quest 4 Quality with Joe, at www.q4qwithjoe.com.
