US Job Growth Stalls,Raising Recession Fears
WASHINGTON – America’s job growth has flatlined,and economist Mark Zandi believes June may have marked the beginning of a recession.New data reveals a cooling labour market alongside cautious business behaviour, fueling concerns about a potential economic downturn despite continued, albeit slowing, growth in output and incomes.
Zandi, chief economist at Moody’s Analytics, described the current economic situation as delicately balanced, with businesses exhibiting caution in hiring acting as a “firewall” preventing a deeper recession. “businesses haven’t panicked yet,” he said. ”It’s just that they’ve turned more cautious in their hiring.That firewall between a stalling economy and a recession hasn’t been breached,but it’s very,very close.”
The cracks in the labor market are becoming increasingly visible.Long-term unemployment has risen over the past year, and more than 6 million people outside the labor force now indicate they are actively seeking employment – an increase from approximately 5.7 million a year ago, according to data from the Bureau of labor Statistics (BLS).
“This really feels like a jobs recession,” Zandi stated. “Employment is flat to down. Output and incomes are still growing, but the economy is incredibly vulnerable. Nothing else can go wrong, or it could tip us into a full downturn.”
Investors are anticipating the slowdown will prompt action from the Federal Reserve. Following the release of the latest economic data, the yield on the 10-year Treasury note fell to a five-month low as traders priced in multiple interest rate cuts before the end of the year. Zandi concurs with this assessment, predicting rate cuts are highly probable.
“We’ll definitely get a cut,” he said, anticipating quarter-point reductions in September, October, and December. “Rate cuts will help cushion things, but they won’t save the economy. The die has been cast.”
Beyond managing inflation and economic growth, Zandi warned the Federal Reserve has important stakes in avoiding a recession, citing concerns about maintaining its independence. He believes a recession would invite increased political scrutiny of the central bank, notably given recent attempts by the White House to influence the Federal Reserve, such as the effort to fire Fed governor Lisa Cook, which prompted a Department of justice probe into allegations of mortgage fraud.
“That’s their number one priority now: keep the economy out of recession,” Zandi said. “It argues for lower rates despite the higher inflation that’s here and likely to come.”
