Economist sounds alarm about imminent recession for ailing U.S. economy
The U.S. jobs market is showing signs of strain, according to Mark Zandi, chief economist at Moody's Analytics. Last Friday, the Bureau of Labor Statistics (BLS) reported that the U.S. economy added 73,000 jobs in July - well below the gain of 110,000 jobs that was estimated by economists polled by LSEG. The agency also revised employment in May and June downward by a combined 258,000 jobs.
These revisions are a normal part of the jobs reporting process, reflecting the balance the BLS tries to maintain between timely reporting and accurate, comprehensive data. Data collection for the monthly jobs report occurs over about 10 to 16 days, meaning some businesses may not have submitted their reports yet when the preliminary numbers are published. Revisions incorporate responses from more businesses that report late, raising the coverage to about 90% or more.
Additionally, later revisions also incorporate official tax records and other administrative data that were not available at the time of the initial report, allowing for better final tallies. The BLS also regularly recalculates seasonal factors to adjust for patterns like holidays and school schedules, which can change the employment numbers upon revision.
Large revisions sometimes occur due to economic conditions or shifting labor market dynamics. For instance, Zandi attributes the large revisions to the payroll employment numbers to the government often reporting payrolls to the BLS late, particularly given the decline in government jobs. He also points to the immigration crackdown as a factor that has hampered the labor market.
The weaker-than-expected jobs report and rising inflation indicate the economy's precarious position, according to Zandi. Inflation is making it tough for the Federal Reserve to support the economy, as per Zandi. Consumer spending has flatlined, construction and manufacturing are contracting, and employment is set to fall, according to Zandi.
These economic woes have led Zandi to predict that the U.S. economy is on the brink of recession. Markets are betting that the Federal Reserve will cut rates in September after the disappointing jobs report.
However, the jobs report has been embroiled in political controversy. President Donald Trump ordered the termination of the Labor Statistics commissioner following the weaker-than-expected jobs report and downward revisions. Trump claimed without evidence that the agency manipulated jobs data for political purposes. The Wall Street Journal editorial board member Allysia Finley discussed this claim, stating that significant revisions happen regularly when the economy is undergoing a transition or entering a recession.
Fed Chair Jerome Powell has previously said that if the central bank is caught in a situation where economic conditions are pushing data further away from fulfilling both of its dual mandate goals of 2% and maximum employment, it would orient its monetary policy to support whichever is further from the Fed’s goal. The current inflation figure, well above the Federal Reserve’s 2% target, could potentially push the Fed to take action.
In conclusion, the U.S. jobs market is showing signs of strain, with the economy adding fewer jobs than expected in July and significant revisions to previous months' data. The current economic conditions, coupled with rising inflation, have led some economists to predict a potential recession. The jobs report has also been embroiled in political controversy, with President Trump claiming without evidence that the agency manipulated jobs data for political purposes.
- The current economic conditions, such as the weaker-than-expected jobs report, rising inflation, and falling employment, have led economist Mark Zandi to predict that the U.S. economy is on the brink of recession.
- The Federal Reserve's ability to support the economy is being challenged by rising inflation, according to Zandi, as it makes it tougher for the central bank to achieve its dual mandate goals of 2% inflation and maximum employment.
- Markets are betting that the Federal Reserve will cut interest rates in September, potentially as a response to the disappointing jobs report and the current economic woes.
