Workforce Services Economist: Despite recession fears, labor market ‘begging for workers’
Aug 8, 2022, 6:28 PM | Updated: 7:47 pm
SALT LAKE CITY — Even though the U.S. just had two-quarters of a shrinking economy, fueling the fears of a recession, the Utah Department of Workforce Services said the economy still needs more workers, as demonstrated by July’s solid employment report.
“So I’m not really surprised that so far the labor market, the economy, is having what appears to be no reaction whatsoever to this negativity,” said Mark Knold, Workforce Service’s chief economist.
Friday’s job report showed U.S. employers adding 528,000 jobs in July. The number of new jobs was more than double what economists expected.
Knold said there’s a shift going on with baby boomers retiring, but there are not enough available workers to replace them. He said those retirees are still spending but no longer producing for the economy in the workforce.
“You can actually have the gross domestic product go smaller but still have the economy begging for workers,” Knold explained. “And that’s what I think is going on, and that’s that transition piece we’re in right now.”
He said there’s a job buffer zone of unfilled positions if there is a recession, especially in Utah’s economy.
“Even if you do get what will quote, unquote be a recession in 2023, I don’t think it’s going the be a job killer that it’s been in the past just because, as I said, you have so much cushion now of unfilled jobs and a recession can take that away before it ever gets to start taking away real jobs,” Knold said.
He also said Utah’s labor market is not showing any warning signs of a recession.
“Here in the State of Utah, the claims data is as low as it’s been,” Knold said. “So we have no initial indications, currently, that there’s any negativity or any layoffs going on in the economy.”
In July’s U.S. employment report, the leisure and hospitality sector showed the most job growth, adding nearly 100,000 jobs. But those types of jobs could be vulnerable in a recession.
“Those are the jobs that, if things start to turn down, will be the first to go,” said Zions Bank senior economist Robert Spendlove. “And so there’s been a reluctance among a lot of people to go back into leisure and hospitality, a lot of the low wage jobs, because of their cyclicality.”
Spendlove said there is a lot of economic confusion and a disconnect between what some are experiencing and the economic indicators.
“We look at some of this labor market data, and it looks great, but when you talk to the average person on the street, they don’t feel like the economy is doing great,” Spendlove explained.
He said the July jobs report was so surprising that it could be revised as more information becomes available.
“I think this data may be revised dramatically because it’s so inconsistent with other economic data,” Spendlove said. “Now, on the other side, if it is correct, then it would indicate that the labor market not only is not contracting, but it’s showing signs of overheating.”
An overheating labor market could push the Federal Reserve to be more aggressive with rate increases in its effort to tame inflation by slowing down the economy, Spendlove said.
