The labor market showed its resilience again Friday, underscoring that a U.S. technical recession would be an anomaly, according to Deutsche Bank.
Nonfarm payrolls rose by 372K in June. Economists were expecting more evidence of employment rolling over like other indicators, with some estimates as low as 200K.
At the same time, the Atlanta Fed’s GDPNow forecast puts Q2 GDP at -1.2%. That would be two-straight quarters of contraction, the technical shorthand definition of a recession.
“We have to be careful of today’s big +372k payroll print as the figure can seem a bit of a random number generator, but through history a recession usually has a negative print in the first month of it being declared, which then carries on for the vast majority of the subsequent year,” Deutsche Bank’s Jim Reid wrote Friday. “This clearly hasn’t happened yet.” (See chart below.)
“While you wouldn’t want to read too much into the absolute level of payrolls historically given the changing labor force size, it is striking how strong job growth has been in recent months as we recover from the pandemic,” Reid said.
“This will likely be under more pressure soon as the lagged effect of inflation and the Fed hiking cycle kick in, but for now it remains historically very strong with a slight caveat of a weak household survey number today.”
“If the economy is in a recession, employers have not seemed to notice,” Wells Fargo economists Sarah House and Michael Pugliese said. “Despite clamors that the economy may already be in a recession due to the possibility of two consecutive negative quarters of GDP growth (a view we do not share), the labor market continues to plow forward, supporting aggregate income and limiting the havoc wrought on spending by high inflation.”
Read the argument that the U.S. is in Schrodinger’s Recession.