Salt Lake City — Though the US economy just shrank by two-quarters, fueling fears of a recession, the Utah Department of Workforce Services said the economy still needs more workers, its solid July jobs report showed.
“So I’m not really surprised that the labor market, the economy, doesn’t seem to be responding to this negativity at all, so far,” said Mark Knold, chief economist at the Workforce Service.
Friday’s jobs report showed US employers added 528,000 jobs in July. The number of new jobs was more than twice as high as economists had expected.
Knold said there was a shift underway as baby boomers retire, but there wasn’t enough available labor to replace them. He said these retirees are still spending but are no longer producing for the economy in the workforce.
“You can actually let the gross domestic product shrink, but still have the economy begging for workers,” explained Knold. “And that’s what I think is going on, and that’s the transition piece that we’re in right now.”
He said that when there is a recession, there is a job buffer zone of vacancies, particularly in the Utah economy.
“Even if you get what’s going to be a recession in 2023, I don’t think it’s going to be a job killer like it’s been in the past just because like I said you have so much cushion now jobs and a recession can do that take away before it even starts taking away real jobs,” Knold said.
US Employers Added 528,000 Jobs; Unemployment drops to 3.5%
He also said Utah’s job market is showing no warning signs of a recession.
“Here in the state of Utah, claims data is at an all-time low,” Knold said. “So right now we don’t have any early signs of negativity or layoffs in the economy.”
In the July US jobs report, the leisure and hospitality sector saw the largest job growth, adding almost 100,000 jobs. But these types of jobs could be vulnerable in a recession.
“These are the jobs that will go first when things get worse,” said Robert Spendlove, senior economist at Zions Bank. “And so many people were reluctant to get back into the leisure and hospitality sectors, many 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 economic indicators.
“We look at some of this jobs 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 well,” Spendlove explained.
He said the July jobs report was surprising enough that it could be revised once more information became available.
“I think this data could be revised dramatically because it’s so inconsistent with other economic data,” Spendlove said. “Well, on the other hand, if it’s correct, then it would suggest that the job market is not only not shrinking, but is showing signs of overheating.”
An overheated labor market could prompt the Federal Reserve to be more aggressive in raising interest rates to tame inflation by slowing the economy, Spendlove said.