US Labor Market Shows No Signs of an Imminent Recession

Checking in on the health of the economy used to mean a quick glance at a handful of indicators: unemployment and inflation rates, a couple quarters of gross domestic product growth, housing market sales, maybe the recent performance of the stock market. That approach isn’t as useful here in the middle of 2022.

For reasons including the unwinding of pandemic behaviors, changes in monetary policy and the energy supply shock from Russia’s war on Ukraine, the data is a mess right now.

So it’s understandable that many Americans believe the US economy is already in recession. The tracking model from the Atlanta Federal Reserve Bank projects that real GDP growth in the second quarter will be negative. If that’s right, following on a 1.6% decline in the first quarter, it would trigger the oft-repeated rule of thumb that calls a recession after two consecutive quarters of negative real GDP growth.

But not so fast. Ultimately, it’s up to the National Bureau of Economic Research to officially declare a recession. And until then, it’s the labor market that’s providing the most accurate picture of our economy’s health. For investors and business operators, the best metric to focus on is aggregate hours worked. In general, the more hours people are working, the higher their economic output, and for now, that metric is still pointing to robust growth rather than recession.