June Job Numbers Point to Mild Recession

Unemployment will remain historically low even as the economy enters recession. Inflation will remain high, meaning we have stagflation.

The Bureau of Labor Statistics just released the jobs report for June. The economy added 372,000 new jobs. That kept the unemployment rate at 3.6%, which is considered a full employment level. This reasonably strong report means that the current recession will be mild, although it will last a bit longer than had originally been thought.

In about three weeks, the government will release the first estimate for gross domestic product (GDP) growth for the second quarter of this year. Even though the economy added an average of 386,000 jobs per month, in the second quarter, GDP likely declined. Since GDP declined 1.6% in the first quarter, even though nearly 600,000 jobs were added monthly, the economy will officially be in recession.

The classic definition of a recession is two successive quarters of negative growth in GDP. However, it is the National Bureau of Economic Research (NBER) that officially declares a recession in the U.S. Its definition includes a significant increase in the unemployment rate. Because of the labor shortage, the unemployment rate will rise only modestly.

Stagflation Is Undeniable