Recession fears have mounted in recent weeks, as inflation continues to strain household budgets and the Federal Reserve appears set to raise interest rates and further slow the economy.
As if blissfully unaware, however, the job market has thrived. Hiring last month exceeded expectations and defied warnings of a downturn.
But the good jobs news could ultimately imperil the economy. Wages last month grew a blistering 5.1% compared to a year earlier, offering welcome relief for workers but also sobering news for Fed officials fearful of runaway inflation driven by income gains.
In turn, a lesser known data point has drawn outsized attention: the share of the adult population not working or actively looking for work. If workers are in ample supply, it gives the labor market some slack and limits wage growth. However, workforce participation came in at 62.1% last month, markedly lower than the pre-pandemic level of 63.4%.