Pre-Pandemic Payrolls: U.S. Adds 528,000 Jobs in July

Jobs Report

Any one of the three items in the Wall Street Journal headline would be newsworthy in itself: The U.S. added 528,000 jobs in the month of July; payrolls returned to the pre-pandemic levels of early 2020; and the unemployment rate dropped to 3.5% (also last seen in early 2020).

What’s most intriguing about all this, of course, is that we are in a very different economic place than that last time those benchmarks were achieved. Inflation remains a huge challenge, the stock market is off by roughly 10% this year, the Great Resignation (or Great Reshuffle, if you prefer) continues in force and we may or may not be headed into, or already in, a recession.

What’s happening here? Are just a couple of sectors driving the positive employment news? It doesn’t appear so. While the hospitality and leisure industries added jobs steadily, so did the sectors impacted by higher interest rates, including construction, manufacturing and finance.

Clearly the job-adding momentum also flies in the face of many headlines this year, especially in the tech sector, where mass layoffs have taken place at companies including Netflix, Lyft and Robinhood, the latter to the tune of about 30% of their workforce (source: Crunchbase).

One economist notes that outside the tech sector at least, companies are using mass layoffs as the last option and not the first, leading instead with hiring freezes and targeted layoffs before releasing workers en masse.

For its part, the Federal Reserve is attempting to engineer a recovery from the highest inflation in 40 years, in a way that doesn’t lead to a major jump in unemployment, the proverbial soft landing.

And adding to this contradictory grab bag of news is the elephant in the room: The Great Resignation. While many expected rising costs and a contracting economy to put the brakes on post-pandemic job-hopping, that appears not to be the case. As recently as June, a massive study of 52,000 workers in 44 countries concluded that one in five intends to quit before the year is out, with compensation as the leading reason.

So if the tech sector is laying workers off on a wholesale basis and so many others are heading for the door voluntarily, how are we still adding jobs? As noted above, some industries are continuing a post-pandemic return to normal as travel and entertainment come back.

For some workers, the return to work isn’t voluntary. An AARP survey finds that a full 3% of those who retired over the past year have returned to work as inflation and stock market gyrations have eroded their savings and spending power. That amounts to 1.7 million people, so while it might be a bit extreme to call it The Great Unretirement, it’s a significant trend nonetheless.

And inflation is likewise driving back into the job market some of the early Great Resigners who also are now finding it financially impossible to stay on the sidelines.

It should be noted that not all retirees or others returning to the workforce are doing so because of bad economic news. The pandemic opened up new possibilities for remote and other flexible working arrangements, making it more attractive to return to a commute-free environment. Others simply find they’ve missed the social interaction of being in a physical workplace.

So it’s all very clear and simple: People are starting new jobs in large numbers … and quitting their old jobs in large numbers. Inflation is forcing people back to the workforce and causing companies impacted by higher rates to stop hiring … except when it’s not. And we’re headed into a recession … or we’re not.