Consumers Are Losers in a Booming Industrial Economy

Reasons to worry about a recession are piling up: the Federal Reserve's inflation fight, a slowing housing market, warnings from retailers and venture capitalists and a smattering of layoff announcements. But one part of the labor market is sending a decidedly different signal. Goods-producing employment, which includes industries like manufacturing, construction and oil and gas extraction — is accelerating rather than slowing as it has in previous recessions.

There are a couple of ways this could play out. If the industrial part of the economy powers ahead while other segments pull back, it could simply represent a shift in activity as the Fed brings inflation under control. The second possibility is that the industrial strength forces the Fed to keep raising interest rates to the point that the economy veers into a recession, mild or otherwise.

Both scenarios are bad news for consumers.

Goods-producing industries account for 21 million US workers, and include most of the cyclical businesses that suffer in downturns. These companies shed three million jobs in the early 2000s, and after a modest recovery shed another five million during the 2008 recession. The segment has lost at least a million jobs in every single recession going back to World War II.

So it's noteworthy that over the past 12 months goods producers have added almost 800,000 jobs, which prior to the pandemic hadn't happened since the early 1980's.

What's even more significant is that the level of job openings in those industries sits at a record high. Other industries have seen labor demand moderate as staffing levels have normalized, but not these companies.