Rising unemployment in July triggers more recession fears

San José, CA – The latest jobs report released Friday, August 2, triggered new fears of a recession as the official unemployment rate rose to 4.3%. This pushes the three-month average unemployment rate up by more than one-half of one percent from its recent low. An increase of this size has been associated with a recession for the last 50 years.

The payroll jobs report was also weak, with only 114,000 net new jobs created in July, according to a survey of businesses. This number was much less than the 175,000 new jobs that economists had expected. In addition, the report reduced job gains for May and June by 29,000. The survey of households that is used to determine the unemployment rate also continued to report far fewer people getting jobs, with the number employed rising by only 67,000.

Among the hardest hit in July by rising unemployment were workers without a high school degree, whose unemployment rate rose to 6.7%, up 0.8% from June. Latino workers were the hardest hit among oppressed nationalities, with their unemployment rate rising 0.4% to 4.6%.

The unemployment rate for men rose 0.2%, twice the rise of women. It is typical of recessions that the unemployment rate for men rises faster than the rate for women.

In another sign of weakness, the “diffusion index” fell below 50%, to 49.6% last month. This means that more industries were losing jobs than hiring more, showing that the employment weakness was broad based.

The weak jobs report was a shock to investors on Wall Street, who had bought into the myth of a “soft landing” where inflation comes down without unemployment rising much. In fact, such talk of “soft landings” tends to multiply right before a recession.

With a recession looming, the blame game has begun. Many are trying to blame the Federal Reserve Bank for not lowering interest rates sooner. But all this amounts to is that the Fed doesn’t see the future. Even if the Fed had lowered interest rates earlier, this would not have prevented a future recession. Recessions have been around in the United States since the 1830s, almost a 100 years before the Fed began raising and lowering interest rates. Economic booms and busts are a feature of a capitalist economy.

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