The US labor market continues to show strength, with economists predicting that July will see robust job growth. The number of new jobs is expected to reach around 200,000, slightly lower than June’s figure of 209,000. The unemployment rate is anticipated to remain steady at 3.6%, near a 50-year low. Despite the expected slight dip in job creation, the overall trend remains positive.
Giacomo Santangelo, an economist at job search site Monster, expects a strong report for July but does not provide a specific number. He believes that the leisure and hospitality sectors, as well as healthcare, will continue to experience growth in the near future. Consumers’ enthusiasm for travel post-pandemic lockdowns in 2020 and 2021 is fueling increased activity in the leisure and hospitality industry.
Jeffrey Rosenkranz, a portfolio manager at Shelton Capital, highlights that the rebound from the pandemic is still driving strong labor demand. Companies are hesitant to lay off workers even during a slowdown because of the challenges they faced in recruiting staff in recent years. However, Rosenkranz acknowledges that this trend may not continue indefinitely.
Factors supporting the job market currently include the impact of stimulus measures like the CHIPS Act and the Inflation Reduction Act. Industries such as semiconductor manufacturing, solar, and electric vehicle production are benefiting from the stimulus. Some companies are also revisiting their supply chains, leading to certain production activities being brought back to the US.
On the other hand, some sectors continue to struggle. Jobs in mortgage financing are expected to remain weak. The recent closure of trucking firm YRC Worldwide may also have a temporary impact on transportation jobs. However, the drivers affected may find alternative employment quickly as other companies pick up the slack. Additional challenges, such as strikes in Hollywood and weakness in domestically focused airlines, could potentially impact job growth as well.
Despite the strong labor market, there are mixed opinions on whether a soft landing for the US economy is achievable. The Federal Reserve aims for inflation to settle at 2%, while unemployment is predicted to rise higher than expected. Economists, such as Santangelo, believe that a recession is inevitable given the cyclical nature of the business cycle.
SA analyst Christopher Robb sees the July jobs report as supporting the possibility of a soft landing, while another SA analyst, Damir Tokic, sees the narrative as uncertain.
Rosenkranz suggests that the impact of higher interest rates operates with a lag, and he believes the Federal Reserve is more likely to overcorrect than undercorrect. However, Santangelo shares that there has never been a soft landing in the US when the money supply contracts. Nonetheless, only time will tell whether the Federal Reserve’s desired outcome will be realized.
It is crucial to note that while the article provides different perspectives, it does not promote or endorse any specific viewpoint. The data and insights presented aim to provide a balanced view of the current state of the US labor market and economy.