Jul 7, 2022 - Politics & Policy

"Jobs day" is the new "CPI day"

Biden wags his finger in front of a sign
President Biden speaks to supporters at Max S. Hayes High School on July 6, 2022 in Cleveland, Ohio. Photo: Angelo Merendino/Getty Images

The White House is bracing for Friday’s jobs report, bearing closely watched clues about what's next for the U.S. economy.

Why it matters: Late last year, release of the Consumer Price Index supplanted the employment report as the most anticipated data dump of the month. Now, with the Fed trying to navigate between growth and inflation, the details of the jobs numbers once again are front-burner.

  • Conventional wisdom — the better the numbers, the better the politics — may not apply when Americans are hammered by high inflation and the effects of the Federal Reserve's efforts to fight it, by higher interest rates and a falling stock market.

What they're saying: “The CPI has gotten all the attention for the past 18 months, but with the U.S. on recession watch, the jobs report is back as the most important data every month,” said Doug Holtz-Eakin, president of the American Action Forum.

  • “The jobs numbers are some of the most immediate, real-time indicators of the economy so are the first place we look for signs of recession,” said Austan Goolsbee, who served as one of former President Obama’s chairs of the Council of Economic Advisers.
  • Some data in the jobs report provide a "better estimate of inflationary pressure than the direct measures of inflation itself," Goolsbee said.

Zoom in: The numbers carry risk in both directions.

  • If they show a combination of massive job creation and wages rising more rapidly, the Fed likely would lean more into its interest-rate rising campaign — creating higher risk of a recession later in the year or in 2023.
  • On the other hand, if the numbers disappoint in a major way — with net job losses or a meaningful rise in the unemployment rate — it will fuel worries a recession has already begun.

The Goldilocks scenario is the hope of financial markets and the White House: an economy still expanding, with workers able to find jobs readily without further tightening of the labor market to goad the Fed into raising rates too far too fast.

  • White House economists are paying particularly close attention to labor force participation, hoping for it to surge and thus increase the supply of workers in the economy — which, all else equal, would tend to dampen inflation pressures.

Driving the news: The Department of Labor report, set to land at 8:30 a.m. ET tomorrow, will reveal how many new jobs the economy is adding — the most reliable barometer of how confident businesses are about future growth.

  • Economists expect the jobless rate to hold steady at 3.6% and for the economy to have added about 270,000 jobs in June.
  • “We think the expectation is the right place to be right now,” said a White House official, adding that it's "very much keeping with the glide path" that President Biden envisioned in late May in the Wall Street Journal.
  • “There’s a lot more going on than just inflation,” the official said. “It’s the president's top domestic priority but it doesn’t characterize the whole economy. For that, you have to look at the job market, GDP, housing, vacancies.”
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