The median number is an additional 250,000 jobs for the month. If we get that, though, it still leaves room for everyone to spin it to their own ends. On one hand, 250,000 is down significantly from the 372,000 last month, down significantly from the three-month average of about the same level, and much less than half the year-ago figure of 689,000. Massive slowdown! On the other hand, 250,000 is still well above the 150,000-200,000 level that was typical in the years before the pandemic, signaling slowing hiring but continued strong labor demand. Which will it be?
To get a better sense of that, we have to look at other data. If you consider not hiring but the available jobs, we can see that there are currently about three million more jobs available than the pre-pandemic level, so reduced hiring is not due to a lack of available jobs. If we look at quits, we see that there are still a much higher number of people voluntarily leaving their jobs. So overall, if we do see a reduction in hiring, even at the expected number, it looks much more likely to be due to a shortage of workers, rather than a sudden shock to labor demand. With demand strong, what matters here is labor availability. So that 250,000 number, slower though it is, will not necessarily be a sign of economic weakness.
Let’s take a deeper look at why that is. First, let’s look at the labor force (i.e., the people who are available to take those jobs). This is a separate survey from the jobs survey, and it yields significantly different results. While the number of jobs has been growing sharply, the growth in the number of workers has started to trend down in the past six months. When you combine this with the fact that a rising number of people who would otherwise be working are out of the labor force due to Covid-19, there is a real likelihood that fewer available workers could pull down the hiring numbers, even as the jobs remain available.
Given these two factors, when we look at the expected number, we should anticipate a drop from recent levels, but perhaps not too big a drop, as demand remains strong. Given that, the 250,000 expectations look reasonable, and perhaps even a bit conservative. If we get anything in the 200,000-300,000 range, that would be in line with the data so far this year and support continued growth. That is what I expect to see. And that would mean that there is still strong labor demand, and we can expect the economy to keep expanding.
Even higher job growth would mean the economy is much stronger than the headline suggests and that people are moving back to work, which would go a long way to putting recession fears to rest. Not likely, given other signs of a slowdown, but certainly possible. Worse results would signal that the economy has suddenly gotten much worse, and a recession is going to happen sooner rather than later—and that would spook markets.
From a market perspective, there are three pieces to the jobs report. First is the actual number, as discussed above. The second is what the number means, also discussed above. And the third is how markets react to that number.
The question markets are looking to answer from the jobs report is whether a recession is imminent. Results around expectations should answer that with a no. But if we do get a weak result, that recession will be much more certain—and markets will respond.