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Jobs data 'make a mockery' of recession fears: Economists react to June's employment report

The latest jobs report showed that the U.S. labor market continued its streak of strong hiring in June, undermining recent warnings among some strategists of an economic downturn.

The Labor Department reported Friday that non-farm payrolls rose by 372,000 last month, far exceeding the 268,000 jobs Bloomberg economists had forecasted. Unemployment stayed at 3.6%, in line with economist estimates and slightly above February 2020's level of 3.5% before the pandemic tipped the economy into recession.

June’s blowout payroll gain comes amid growing concerns of a potential recession hitting the labor market as the Federal Reserve raises interest rates to tame surging inflation and as some companies announce hiring freezes and layoffs. But economic data has so far failed to suggest a broader slowdown in employment.

A flurry of Wall Street reactions followed Friday’s data. Yahoo Finance rounded up some of what we got in our inbox and what experts said on our Live show below:

Andrew Hunter, senior U.S. economist, Capital Economics:

“The strong 372,000 gain in non-farm payrolls in June appears to make a mockery of claims the economy is heading into, let alone already in, a recession. That may be enough to solidify the case for another 75bp rate hike at the Fed’s meeting later this month, although signs that wage growth is cooling and the recent plunge in commodity prices both suggest the inflation outlook could improve more quickly than officials had feared.”

Joe Brusuelas, principal and chief economist, RSM US LLP on Yahoo Finance Live:

“When the economy goes into a recession, it doesn't do it slowly — it tends to fall off a cliff. Economies in recession don't add 375,000 jobs per month on a three-month moving average and you don't get a 372,000, one-month increase, so I think there should be some measure of relief for the inhabitants of the real economy.”

Seema Shah, chief strategist, Principal Global Investors on Yahoo Finance Live:

“We see the latest job market data as further evidence that recession is not upon us. Certainly, the risks are still there. We do believe there will be a U.S. recession in 2023. But as long as you have inflation pressures as high as they currently are, I think it’s a very difficult question to ask the Fed to stop at this point, so we are expecting further significant tightening from the Fed.”

Oxford Economics Chief U.S. Economist Kathy Bostjancic and Lead U.S. Economist Lydia Boussour: "The June employment report underscores Chairman Powell's view that the labor market is still extraordinarily tight despite some moderation in wage growth. As such, today's report supports our call that the Fed will raise the fed funds rate by 75bps on July 27. The resilient labor market provides the Fed room to focus on reining in inflation."

Pantheon Macroeconomics Chief Economist Ian Shepherdson:

“Overall, the jobs data support our view that talk of the economy being in recession right now is fanciful, while the wages numbers suggest inflation pressure is easing. Markets tend to react more strongly to payrolls than to wages, so we’re not surprised to see the Treasury curve rise and flatten; the recession story was over-priced. Thinking a bit further ahead, though, these data are consistent with our strong view that the Fed’s September decision will be 25bp or 50bp; markets currently price-in 56bp.”

Comerica Bank Chief Economist Bill Adams:

“High inflation and a shift of consumer spending from goods to services is causing job losses in some sectors of the economy, but most workers who are losing jobs are finding new ones quickly. Employment in non-depository credit intermediation, which includes non-bank mortgage lenders, fell 9,300 in June. And while retail employment was up on the month, it is still down 50,000 from its peak in February."

Ameriprise Chief Economist Russell Price:

“As with so many reports, the Jobs Report has become a story of inflation implications. On that front, today’s report offered mixed messages. It was good to see Average Hourly Earnings growth further decelerate. Since hitting a year-over-year peak of +5.6% in March, the measure has declined for three straight months through June. Signs of easing wage pressures are particularly important to the inflation outlook as persistent upward wage pressures are often a sign of inflation expectations becoming entrenched in an economy. At their current pace, we project Average Hourly Wage growth should continue to decelerate over coming months and end the year at +4.0%.”

Bill Dicke, president of Tungsten Collaborative gives a high five to his dog Nature May 5, 2022 in Ottawa, Canada. - According to a recent Leger survey for PetSafe, 51 percent of Canadians support bringing dogs to the office.
Younger workers were the most supportive, with 18 percent of those aged 18 to 24 years saying they would change jobs if their employer refused to allow them to bring their pet to work.
With an estimated 200,000 Canadians adopting a dog or cat since the start of the pandemic in 2020, bringing the nationwide total to 3.25 million, it could force employers now pressing staff to return to the office to consider this option. (Photo by Dave Chan / AFP) (Photo by DAVE CHAN/AFP via Getty Images)
Bill Dicke, president of Tungsten Collaborative gives a high five to his dog on Nature May 5, 2022 in Ottawa, Canada. (Photo by DAVE CHAN/AFP via Getty Images)

Commonwealth Financial Network Head of Portfolio Management Peter Essele:

“Employment gains were seen across all segments of the economy, including service and goods-producing segments. While the bears have been sounding the recession alarm as of late, today’s release suggests the economy remains on solid footing. Year-over-year job growth stands at 4.31%, the largest gains in almost 40 years. It’s difficult to rectify how some are claiming the economy is in recession when job growth remains well above long-term averages and wage growth is the strongest in decades. More jobs and higher pay means more consumer purchasing power, which bodes well for an economy that’s two-thirds consumption.”

LPL Financial Chief Economist Jeffrey Roach:

"In contrast to what some pundits are suggesting, the economy is not currently in recession and we should expect the labor market to expand but at a slower pace as firms still struggle with finding suitable workers. Firms will still likely be increasing wages as they deal with a shortage of qualified workers and elevated quit rates. The high number of people not returning to the work force is one of the nagging problems with the labor market right now. Relative to pre-pandemic levels, the economy has 4.8 million more people out of the labor force. Some likely took early retirements but that does not explain the rest of the story. The labor market will remain tight with low unemployment as roughly 5 million people have not yet rejoined the workforce."

Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc

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