The national unemployment rate reported by the U.S. Bureau of Labor Statistics (BLS) rose from 3.5 percent to 3.8 percent in August as an additional 514,000 Americans said they could not find work in the BLS’s household survey. Now 6.3 million Americans are said to be unemployed, the highest in more than a year.
But it did not come with a commensurate drop in the number of Americans saying they were working, which increased by 222,000 to 161.48 million.
Instead, it came amid a 736,000 increase in the civilian labor force, which included a 525,000 decrease in the number of Americans not in the labor force and a 211,000 increase in the non-institutional civilian population.
This represents Americans entering the labor force, either from the sidelines or for the first time, but being unable to find a job.
The news comes amid another drop in the number of job openings by 338,000 in July to 8.8 million, a 26.6 percent decrease from its 12 million peak in March 2022. That usually happens during economic slowdowns or recessions, and is associated with increases in unemployment, which is what we’re seeing now.
Other troubling signs include the annual growth of consumer credit that peaked at 9.95 percent in April 2022, dropping to 7.8 percent annualized by December 2022 and then falling to 5.7 percent in June 2023. This indicates Americans have maxed out their credit after the rampant inflation of 2021 and 2022 and are now slowing down spending to catch up on their bills. The economy overheated and so did household budgets.
The slowdown in credit accumulation has also coincided with the slowdown of annualized inflation, which peaked at 9.1 percent in June 2022 but now has slowed down to 3.2 percent in July. The July number is actually bouncing off the recent low of 3 percent in June, and so the Federal Reserve is still considering additional interest-rate hikes, which should further choke credit accumulation until inflation is normalized.
That usually means a recession, despite President Joe Biden’s hopes that it will not come to that.
On that count, the Federal Reserve is still placing a “significant probability of a recession occurring by the end of 2024,” according to the minutes of its July 25-26 meeting of the Board of Governors that was released Aug. 16.
“Respondents to the Open Market Desk’s Survey of Primary Dealers and Survey of Market Participants in July continued to place significant probability of a recession occurring by the end of 2024. However, the timing of a recession expected by survey respondents was again pushed later, and the probability of avoiding a recession through 2024 grew noticeably.”
That is slightly more optimistic than in June when the Fed had projected that “the effects of the expected further tightening in bank credit conditions, amid already tight financial conditions, would lead to a mild recession starting later this year, followed by a moderately paced recovery. Real GDP was projected to decelerate in the current quarter and the next one before declining modestly in both the fourth quarter of this year and first quarter of next year.”
The Fed in June projected unemployment to keep rising steadily to 4.1 percent this year and up to 4.5 percent in 2024, an implied 1.3 million jobs lost between then and now. Now, with unemployment at 3.8 percent, it is possible that its projection is coming true. Peak employment might be about to sunset, and with it, so too might President Biden’s reelection hopes.
Robert Romano is the VP of public policy at Americans for Limited Government (ALG). The organization says it is a “non-partisan, nationwide network committed to advancing free-market reforms, private-property rights, and core American liberties.”