August Business Report: “Economic tea leaves hard to read”

On Friday, the US Bureau of Labor Statistics will release unemployment figures for August.

Erica Groshen, senior economics adviser at Cornell, is an expert in labor statistics. She has also served as Commissioner of the United States Bureau of Labor Statistics and Vice President of the Federal Reserve Bank of New York and has written extensively on how economies can recover from recessions. She can talk about unemployment rates and labor market trends.


Erica Groshen

Visiting Senior Researcher at the School of Industrial and Labor Relations

“Economy tea leaves are particularly hard to read lately.

“On the one hand, two BLS reports bolstered assessments of the strength of the US economy and labor market:

  • The latest BLS employment situation indicated that 528,000 jobs were added in July (exceeding the expectations of most forecasters) and
  • The normal annual recalibration of payroll jobs estimates found job gains in 2021 were 462,000 higher than originally reported.

“On the other hand, preliminary GDP estimates for 2022 suggest that activity has slowed. a contraction) and those based on income (showing continued growth).

“The Federal Reserve seeks to slow the pace of growth in order to slow inflation. Starting in mid-March 2022, they raised the target federal funds rate four times and plan to keep raising it. They are also gradually unwinding their portfolios of assets accumulated under quantitative easing, which is contracting the money supply. The objective is a “soft landing”, ie weaker employment growth and a modest increase in unemployment without plunging into recession. Monetary policy actions such as this affect job growth, but the time frames for impact are often referred to as “long and variable.” So where can we see them and how big are they?

“The employment picture for August may provide some clarity as to the dynamics of the U.S. economy. Beyond the gains (or losses?) in overall payroll jobs, analysts will examine the hours , wage growth, the diffusion index, and the extent to which employment growth is affected in interest rate sensitive sectors (such as construction, durable goods, temporary help services and In the household survey, they will look at what happens to labor market participation and to people working part-time for economic reasons.

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