Introduction

This episode dives into the July 2024 US jobs report, unpacking the latest labor market data and what it could mean for the economy moving forward. With job gains significantly below expectations, a rising unemployment rate hitting a three-year high, and shrinking employment across many industries, there are plenty of concerns to discuss. At the same time, some economists offer a more nuanced view, weighing in on whether these signals point toward an upcoming recession or just a market adjustment.

Yazad Dalal: Hi everyone, I’m Yazad Dalal, Chief Growth Officer here at Joveo and welcome to Recruiting Realities, where we bring to you the latest developments and insights in recruitment. Today we are speaking, once again, with our in-house labor market economist David Garrett about the US jobs report that just came out for July 2024. Hello David!

David Garrett: Hey, how’s it going? Happy to be here.

Yazad Dalal: Great. David, before we get started for our listeners, at Joveo, we publish Interactive Insights across all major occupations in the US. You can check them out on our website, joveo.com/interactive-insights 

Now, David, the most recent US jobs report came out for the month of July. The US labor market gained, I think, 114,000 jobs in July. That’s a lot below what most people were expecting – definitely below the 215,000 jobs that we’ve had on average created over the past 12 months. I think the unemployment rate jumped a quarter point, reaching a three-year high. The average number of hours worked per week fell. The number of industries that saw an increase in employment continues to narrow, it’s less than 50%. And on top of all that, financial activities, professional and business services, and temporary help – all lost jobs. And then on top of that, the stock market dropped. 

Although by the way, it now seems to be back, at least as of the date we’re recording. So, David, I have a lot of questions. Let’s get started. First of all, with all of the negatives coming out of this report, what’s your main takeaway? And more importantly, are there any positives here?

David Garrett: Yeah, I mean, unfortunately, the last report really did hit us with a lot of negative news. I think it also was a little more unexpected with the lower, lower than expected numbers for new jobs. But it also follows from the trends we’ve been seeing over the past month, you know, month or two. But, you know, as you kind of said, I’m sure that anyone watching the stock portfolio of the last few days probably noticed the kind of impact that this heavy-handed of a negative report can have on people’s confidence.

Yazad Dalal: And I keep seeing conflicting views from different talking heads. I read the Sahm Rule. I learned about the Sahm Rule, which says that when the three-month moving average of the unemployment rate goes up by half a percentage point or more from its lowest 12-month level, that mightmean we’re at the beginning of a recession.

David Garrett: Yeah, mean, if the rule holds true, you know, unfortunately, as it has previously, then it would mean that the increase in the traditional unemployment rate and the, it was about 0.4 % surge in the rate of people who want to work but have given up searching, and those who were working part-time because they can’t find full-time employment, you know, these two values do give a more broad view of unemployment and they strongly signal that we might either be moving into a recession or have already entered one and we’re just kind of waiting for the BEA to make their official call.

Yazad Dalal: Okay, so that’s the Sahm Rule, but what are some other counterpoints that you’re hearing?

David Garrett: I mean, as anybody who circulates into the econ world knows, economists are kind of cantankerous and very argumentative, very hard to get a straight answer out of a lot of the time. know, Ernie Tedeschi, the Director of the Budget Lab at Yale, he pointed out that, you know, we aren’t seeing a significant increase in the number of people fined for unemployment claims, or, you know, a drop in the share of people in their prime working years who are, you know, employed or unemployed. You know, these more than likely point to these increases being, these increases being more along the margin or like showing marginal weakness in the labor market, not necessarily something that’s gonna spiral out and kind of spread. It’s also, you know, I’ve seen a lot of comments about how it’s a very strong signal to the Fed that we are reaching the point where they, you know, they need to begin cutting interest rates. I’ve seen someone who made a comment about how they’re, if they don’t, they’ll be snatching defeat from the clutches of victory, you know.

And I recall reading another recent article where a group of economists were basically saying that it’s not a matter of if the Fed will lower interest rates at this point and more a question of how much. As a continuing point, I think it’s also worth mentioning that there is a Department of Labor release today on the unemployment claims and they’re showing a pretty large decrease of I think around 17,000 for new initial claims, while continuing applications has hit its highest levels since, actually, November 2021.

You know, even before this, there’s comments about maybe that this is just reaching a normalization point that we’re kind of hitting full employment, as some economists will call it, for whenever we have just like the optimum number of people working in roles. And so it’s not necessarily an indication of weakness and more just the market adjusting to where it needs to be at.

Yazad Dalal: Well, I hope that we start to see some good news around the corner. Thank you very much, David, and thank you to our listeners. Don’t forget to visit us at Joveo.com, and we’ll speak to you again soon.

David Garrett: Yeah, look forward to it.

Conclusion

The July jobs report highlights ongoing challenges in the labor market and raises important questions about whether the economy is heading into a recession or stabilizing after recent shifts. While some indicators suggest caution, others offer reasons for optimism, particularly regarding potential policy responses and labor market normalization. Stay tuned for the next update.