Rosy Jobs Predictions Come Crashing Back Down To Earth
Today’s jobs report shows the labor market isn’t nearly as strong as the topline 3.6% unemployment rate suggests. In reality, it reflects the anemic economy facing small businesses and employees.
The 209,000 jobs created last month is mediocre, coming in below expectations and at the lowest level since 2020. Nonproductive government jobs were the leading job creation sector. Prior months’ job gains were revised down by 110,000. In fact, payrolls for every month in 2023 have been revised lower.
Average wages grew slower than core inflation over the last year, meaning Americans’ incomes are not keeping pace with the cost of core goods and services. If Americans can’t command wage increases that exceed their cost of living, then the labor market isn’t strong.
“This is Bidenomics in action,” crowed President Biden, using his new favorite euphemism for big government policy. “Our economy added more than 200,000 jobs last month—for a total of 13.2 million jobs since I took office. That’s more jobs added in two and a half years than any president has ever created in a four-year term.”
This claim is misleading at best. It counts all the temporarily lost jobs during the pandemic that were quickly backfilled when Biden took office, and the pandemic ended. In reality, only 2.2 million more people are employed today compared with February 2020. Biden’s claim is only off by 11 million!
Today’s report also reveals a big increase in the number of part-time employees who would prefer to work full-time. At the same time, the length of the average workweek remains mired at 34.4 hours, down from 35 hours when Biden took office in January 2021.
These indicators suggest employers are cutting back, even if not cutting jobs. Indeed, JCNF’s most recent SBIQ poll of national small business owners shows nearly two-thirds of employers are pausing hiring and wage increases. Keep in mind that most American workers are paid hourly, so when their hours decline, so do their earnings.
The report also shows that labor force participation remains well below its prepandemic peak. The U.S. is closing in on a depressing milestone: a record 99.9 million Americans are not in the labor force.
A separate labor market report released earlier this week shows that quit rates have significantly softened over the last year and are back near prepandemic levels. The decline in quit rates is especially pronounced in small businesses that do the majority of hiring. Fewer quits indicate employees are not confident in the jobs market. As Julius Maupins, a packaging and paper warehouse worker from Kansas, puts it, “I don’t think right now is a good time to do a lot of jumping around.”
Today’s mediocre jobs report is unlikely to stop the Federal Reserve from hiking interest rates at its meeting this month. This is a big concern for small businesses, who have seen their access to credit dry up as the Fed has aggressively raised rates to fight Bidenflation.
“We keep pushing ourselves to stay open but as soon as we feel we get a grasp on one thing something else comes out of left field,” says Laura Lacy, who owns Attic Brewing in Philadelphia. “Everybody I’m talking to who needs a loan right now isn’t able to get one.” This credit crunch comes at the same time her brewery faces a 30% increase in raw materials due to Bidenflation.
New data shows Chapter 11 bankruptcy filings in the United States increased 68% in the first half of 2023 — and 55% for small businesses — compared to the same period last year. Another rate hike would only compound the pain and threaten the ability of small businesses to survive and thrive. According to JCNF’s SBIQ poll, two-thirds of small businesses say rising rates reduce their access to credit.
The labor market is a lagging indicator, but it may finally be catching up to Biden’s anti-small business policies. Additional Fed rate hikes will make it catch up much quicker, inflicting more economic pain on small businesses and ordinary Americans.
Alfredo Ortiz is president and CEO of Job Creators Network and author of The Real Race Revolutionaries: How Minority Entrepreneurship Can Overcome America’s Racial and Economic Divides.