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Today’s surprise in the July jobs number–the U.S. economy added 528,000 jobs rather than the 270,000 or so economists expected is indeed a big deal. It certainly argues that any “official” recession call from economists is still a way off. And it shows an economy hot enough to result in a 75-basis-point interest rate increase from the Federal Reserve on September 22 rather than the 50 basis points that the financial markets were expecting just a couple of days ago.

But there are numbers below the headlines of this report that make me wonder if the labor market–and the economy–is as hot as the headline number argues.

The place to begin is the difference between the official unemployment rate and the U-6 all-in unemployment rate.

The official unemployment rate dropped this month to 3.5% from 3.6% in June. That’s the lowest unemployment rate in 50 years.

The official unemployment rate doesn’t count discouraged workers who have given up looking for work or workers in part-time jobs who would like to have full-time jobs.

Those workers get captured in the U-6 rate, which the Bureau of Labor Statistics defines this way: “U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force”

Unlike the official unemployment rate, the U-6 unemployment rate rose in July. The U-6 nudged upward to 7/.2% (not seasonally adjusted in July) from 7.0% in June. Not a big jump but a trend pointing in a different direction from that trend in the official unemployment rate.

According to the BLS, “The number of persons employed part time for economic reasons increased by 303,000 to 3.9 million in July. This rise reflected an increase in the number of persons whose hours were cut due to slack work or business conditions. The number of persons employed part time for economic reasons is below its February 2020 level of 4.4 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.”

And the number of discouraged workers who aren’t counted as being part of the labor force because they’re stopped looking for a job was steady in the month. “The number of persons not in the labor force who currently want a job was 5.9 million
in July, little changed over the month. This measure is above its February 2020 level of 5.0 million.”

I’ve got my suspicions about what’s going on in the labor market that isn’t captured in that 528,000 increase in jobs in July.

Those suspicions rest on an examination of what sectors in the economy were producing the most jobs. In July, leisure and hospitality added 96,000 jobs. Employment in health care rose by 70,000 in July. Job gains occurred in ambulatory health care services (+47,000), hospitals (+13,000), and nursing and residential care facilities (+9,000). Employment in construction increased by 32,000 in July, as specialty trade contractors added 22,000 jobs.

What these sectors have in common is a high proportion of jobs that have flexible hours and where workers are relatively easily laid off.

In other words, I’ve got to wonder if the economy is creating lots of full-time jobs with benefits and guaranteed work weeks because companies are optimistic about the future of the economy or whether companies are hiring a lot of part-time workers with flexible, and easily reduced work weeks in order to hedge their bets on economic growth.

Worth p9ndering before we conclude that the July jobs numbers are evidence that the economy isn’t headed toward a recession.