Jobs are being added at a strong rate, with an average of 244,000 new jobs per month. The labor market continues to contribute substantially to the US economy as per the labor market report, adding 1.6 million jobs in the first half of 2023 and driving economic growth. Despite concerns about a possible recession, the labor market remains convincingly strong, mitigating the likelihood of an economic downturn.
If I were to describe the performance of the labor market in the Q2 in one word, I’d say ‘resilient’. With multiple news articles and headlines warning of the dark cloud of recession looming over the US economy, a slow but steady labor market continues to generate jobs, increase wages, and maintain a low unemployment rate.
The quarter began with the unemployment rate at 3.4% in April, the lowest since 1969. Jobs were added at a rate of 244,000 per month in the quarter, somewhat lower than the yearly average of 316,000 in the previous year owing to increased hiring after the pandemic. In June, for the fourth consecutive month, the labor force participation rate remained stable at 62.6%.
In a country where an aging population might be a worry, it’s reassuring that young workers are eager for employment. This reflects in the participation of “prime age” workers (aged 25-54), which has crossed pre-pandemic levels. In fact, the rate was a whopping 83.4% – the highest in over 15 years. With more women seeking jobs to support themselves and their families than ever before, the participation of prime-age women stood at 77.8%, also the highest on record.
According to the Bureau of Labor Statistics (BLS) an impressive 339,000 new jobs were generated in May. Business and professional services led demand, followed closely by positions filled in healthcare and government. Construction, hospitality, and transportation were the other prominent sectors which helped boost the hiring numbers.
This marks the most substantial increase since January and beats the Wall Street consensus forecast, which anticipated figures of 185,000 new jobs. As per Sal Guatieri, a senior economist, the increase in payrolls and the recent upswing in job openings suggest that American businesses are continuing to hire at a strong pace. He speculated this is likely due to unwavering consumer demand in the market.
The labor market added 209,000 workers to the private sector and government agencies (nonfarm payroll) in June. While the number may look concerning, it equates to a ‘soft landing’ of sorts, beating inflation without setting off an economic slowdown. According to Rucha Vankudre, a senior economist at Lightcast, slowing job growth is not necessarily a bad thing. After all, the goal is to lower inflation without letting a recession creep in – and US employers have been consistently adding workforce for 30 months straight! Moreover, employment is still stronger than pre-pandemic levels. The unemployment rate also dropped to 3.6% in the same month.
In summary, the US labor market showcased resilience in Q2 2023. With steady job growth averaging 244,000 new positions each month and a total of 1.6 million jobs added in the first half of the year, the labor market remains a key driver of economic expansion. The unemployment rate stayed impressively low, dipping to 3.4% and then 3.6% in June.
Noteworthy is the strong participation of young and prime-age workers, indicating sustained interest in employment amid demographic shifts. Various sectors, including business services, healthcare, and construction, contributed to impressive job creation. May’s 339,000 jobs surpassed predictions, and June’s addition of 209,000 workers showcased a balanced approach to economic stability and controlled inflation.
In essence, the labor market’s unwavering performance in Q2 reflects its resilience. Amid recession concerns, it continues to bolster the economy through consistent job creation, affirming the nation’s adaptability and commitment to growth.
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