Jobs report exceeds expectations but unemployment rise signals cooling labor market

The U.S. Economy added more jobs than expected last month, the 42nd consecutive month of job growth. But unemployment inched up to 4.1 percent and there were other signs of a cooling labor market. For a deeper look at what this means for the economy, Amna Nawaz spoke with Roben Farzad of Full Disclosure.

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Amna Nawaz: Today, President Joe Biden is digging in. In more than one appearance today, he underscored that he has no plans to leave the campaign, despite calls from some Democrats and supporters. We will have more on that story later in the program.

Meanwhile, the U.S. economy added more jobs than expected last month, marking the 42nd consecutive month of job growth; 206,000 new jobs were added in June. Government hiring accounted for more than a third of those, followed by health care, social assistance and construction. Unemployment also inched up to 4.1 percent, making it the first time it’s risen above 4 percent in more than two years.

And there were other signs of a cooling labor market. Job gains in April and may were revised downward by more than 100,000 jobs.

For a deeper look at what this means for the economy, I’m joined by Roben Farzad, host of public radio’s “Full Disclosure.”

Roben, always good to see you.

So what do these numbers say to you? Is it a sign that the economy may be cooling?

Roben Farzad, Host, “Full Disclosure”: Certainly, market watchers have been looking for that, econ watchers, for the longest time, because the Fed had to ratchet up rates after its error, I think, coming out of the pandemic and leaving rates too low for too long, and so still in the process, I think, of mopping up inflation.

But it’s odd. Are you rooting for good news? Yes, if you’re the White House. Are you rooting for bad news? Maybe if you’re investors or traders. And yet the market is at an all-time high. Real estate is at an all-time high. Crypto is looking puff.

So it’s a real debate on Wall Street. Do we even need rate cuts? Maybe the Fed just needs an excuse to maybe take down a little and wait and see.

Amna Nawaz: Well, what about those interest rate cuts? I mean, employment has cooled. Wages have also cooled. We should note wage growth has been generally declining since March of 2022. Inflation has cooled slightly, not all the way down to 2 percent, which is know — we would know, where the Fed wants to see it.

Some economists are arguing it is now time for the Fed to cut interest rates. Do you think they will?

Roben Farzad: Maybe they will, I think, in the September quarter. That gets powerlessly close to the election.

And let me say, coming in out of a wild card, that there is now risk from a kind of institutional perspective. If the market starts to feel consternation about the election or about the position of democracy, a contested convention — I think you guys have covered this left and right.

The Fed has many arrows in its quiver to handle that. So far, there’s no sense of crisis out there. There are streaks of weakness in the economy. The unemployment rate is still at 4 percent, which is considered a natural level. Inflation is a little bit too high for comfort for the Fed to be cutting at least aggressively. So there’s really no urgency to this.

Amna Nawaz: There’s no urgency, but give us a sense of what other signs you think they may be looking for here.

How much of a cooling, how much of a slowdown do you think is needed?

Roben Farzad: Gosh, can you imagine 2008, right? That was crisis, the feeling of freefall. Can you imagine the beginning of 2020, when unemployment shot up, I think in April, up to 14.8 percent. You had mentioned that we had job growth now for 42 straight months.

The Fed, at least this century, has saved a lot of its powder for those types of crises. And we haven’t tasted anything like a crisis since this — the onset of this pandemic. If you might remember, we had like a banking swoon a couple of springs ago. I mean, that stuff is short-lived, and I think the Fed is more worried on balance right now about rekindling an inflation that’s just so difficult to put out.

Everybody is — nobody out there is really used to these prices going up as much as they did and staying where they are.

Amna Nawaz: What are some of the unknowns we’re not thinking about here, Roben? I mean, what else are you going to be watching for in the months ahead?

Roben Farzad: Again, I’m thinking about the election. I’m thinking about volatility from a headline perspective, if you remember what markets did — this is a long time ago — during the kind of the Gore-Bush recount and those intervening month, month-and-a-half, two months.

I’m thinking about institutional cracks. You see a lot of distress in commercial real estate right now and a lot of landlord forbearance. You saw a headline this week about student loan debt, and so much of it remains unpaid and unserviced. What happens if that comes back online and everybody is stuck with a bill again?

That’s an economic shock of its own kind. The good news is, the Fed took up rates by a chunky, what, 4.5, 5 points, and there’s plenty of room to hike if it needs — I mean, to cut aggressively if it needs to, but, then again, no sign of that yet.

Amna Nawaz: There’s an interesting nugget from this report I want to put to you to get your take. It’s worth noting the jobs report showed that teen summer employment is at its highest rate since 2007. More than 37 percent of teenagers are now working.

What does that say to you?

Roben Farzad: Gosh, Kings Dominion is halfway between us, right? I’m in Richmond. You’re in Northern Virginia. You try running a theme park in this environment without teens who are out there eager to make $14, $15, at a time of tipflation, no less.

You try running a diner. You try running any sort of hospitality-driven business. You saw hospitality was such an ongoing strong point in those jobs numbers. It’s so hard to get people to show up for job interviews, and much less to keep that job, that this has opened up wage opportunities for teenagers, the likes that I don’t think we have ever seen.

Back in my time, you would be lucky if you earned $4.25, five bucks. I mean, yes, and even in the inflation-adjusted terms, a lot of people out there are making $75, $100 a day now.

Amna Nawaz: We have less than a minute left. But I have to ask you, big picture, we talk a lot about the vibe session, about this gap between what we’re actually seeing in the economy and what people feel in their everyday lives.

Does anything in this number — these numbers today say to you that will change?

Roben Farzad: I think that it’s still a bifurcation. I can’t believe that it’s like this. If you have capital assets, if you have stocks, if you have real estate, if you have crypto, you’re feeling flush, you’re feeling hale and hearty, and you could more than absorb this inflationary hit.

If you’re paycheck to paycheck, if you are one of those millions of Americans who cannot make an emergency expense, all of this news about asset markets is so much cold comfort. If you’re somebody that can’t afford a house, what’s going to happen if the Fed takes rates down and that stimulates a mortgage market that doesn’t really need it right now?

It is certainly a confusing time.

Amna Nawaz: Roben Farzad, host of public radio’s “Full Disclosure,” always good to see you. Thank you.

Roben Farzad: Likewise. Thank you.