Top Economist Warns: Economic Gains Are Widespread but Fragile—A Sign of Recession Ahead?

The U.S. labor market is showing signs of strain, with the latest report revealing just 22,000 new jobs added in August. Additionally, the unemployment rate has risen to 4.3%, its highest level in four years. This comes after a revision to June’s data, which now indicates a loss of 13,000 jobs, sparking concerns about a potential recession.

Torsten Sløk, chief economist at Apollo Global Management, noted that sectors affected by tariffs are struggling and even reported job losses. In August, manufacturers cut 12,000 jobs. On a brighter note, healthcare and social assistance added 46,800 jobs, while leisure and hospitality sectors increased by 28,000 jobs. Mark Zandi, chief economist at Moody’s Analytics, emphasized that the recovery is heavily reliant on these two sectors, which raises alarms about broader economic health.

“The economy seems increasingly vulnerable,” Zandi shared on X (formerly Twitter). He noted that without the job growth in healthcare and hospitality, the economy could have seen a net job loss this year. Year-to-date, jobs in healthcare and social assistance, along with leisure and hospitality, have saved the economy from a deeper slump, tallying 855,900 new jobs. In contrast, many other sectors are stagnating.

According to the Bureau of Labor Statistics, less than half of the industries tracked saw job growth over the last six months, a concerning trend typically indicating recessionary conditions. The jobs diffusion index, which measures the breadth of employment growth, was at 49.6 in August, signaling more job cuts than additions. A three-month average of 47.9 reinforces this troubling picture.

This struggle in the job market is not entirely unexpected. Zandi has repeatedly warned of a potential recession, stating, “This really feels like a jobs recession.” The job market has become flat, despite growth in output and incomes. Even long-term unemployment is rising, with over 6 million people outside the workforce now claiming they want jobs—up from about 5.7 million a year ago.

Edit to add perspective, the economy grew by 3.3% in the second quarter, and current projections indicate a 3% GDP growth for the third quarter. Treasury Secretary Scott Bessent, responding to Zandi’s comments about a “jobs recession,” pointed to the government’s policies designed to foster high-paying jobs. He acknowledged that August data often undergoes significant revisions, emphasizing the need for cautious optimism.

As the economic landscape evolves, experts continue to analyze the risks and recovery efforts needed. Ultimately, while there are signs of growth, the over-reliance on specific sectors raises questions about the sustainability of this recovery.

Source link

Health Care Service,Hospitality,Recession,U.S. jobs report