Gasoline expenditures as a share of personal income have soared since spring 2021 but remain near the average for the decade. Source: Bureau of Economic Analysis.
No financial institution or analyst has to date published a forecast of a steep recession. There is little chance that the expected slowdown will increase unemployment significantly. The banking system has few liquidity or leverage problems. Consumers have hiked their credit card and personal loan volume, but household balance sheets are such that an increase in unemployment should not create a problematic increase in delinquency or foreclosures. The latest Employment Situation Summary, issued August 5, showed hiring that was above the trend for 2022. Following unprecedented job growth in 2021, U.S. employers have added fewer new workers each month this year. Employment growth has averaged more than 471,000 per month in 2022, but the pace has slowed to 379,000 over the previous four months. July’s gain of 528,000 jobs reversed the slowing pace of growth. The unemployment rate fell to the pre-pandemic low of 3.5 percent. While worries about a recession have grown as the year as unfolded, the data suggests that job growth has been limited has much by the scarcity of available labor. The number of unfilled positions fell, but remains near the 2022 highs, at 10.7 million jobs. Since June there has been a steady, if slight, increase in the number of both first-time and continuing claims for unemployment compensation. After falling as low as 166,000 in mid-March 2022, the number of initial claims jumped above 230,000 during the first week in June and has risen above 250,000 since late July. These levels remain below those that predict a significant increase in unemployment; however, if layoffs expand beyond industries that have been disrupted by higher interest rates – like housing and manufacturing – the impact will broaden the sense that the economy is in recession. Should the psychology of a recession become more prevalent, with consumption and business investment falling more steeply, it is likely that many of those open positions would disappear; however, the gap of four million between job seekers and open
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