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Recession Chatter vs. Data

July 15, 2022

Even though a lot of data is pointing in a positive direction, there is still a lot of talk around a coming recession. Dive into how the recession chatter compares to the data with the latest episode of TrendsTalk with ITR President and Speaker Alan Beaulieu. 



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The below transcript is a literal translation of the podcast audio that has been machine generated by Rev.

Hi, I'm Alan Beaulieu and I get to be the president of ITR Economics and I just want to talk to you for a couple minutes today about this whole recession thing. We hear a lot about it and I'm not saying there's not going to be one. It could be a technical one as there was in the first quarter. But when you look at gross domestic income, there was no downturn. The softness of the first quarter had more to do with the trade imbalance than anything else. Whether that will continue or not, we'll see, but it shouldn't matter to you. If you're not tightly, extremely tightly correlated, to gross domestic product, then wrangling over whether there's a recession or not is not the important thing. It's whether it's going to impact your industry.

If you're in housing, what's going to happen? If you're in the automotive industry, if you're in the wholesale trade of lumber, if you're in a wholesale trade of food or beverages or alcohol, what's going on in your world? If you're in a healthcare industry, what matters is what's going on in your world. And you can find that out. There are lots of different ways. Go to our website,, and there are people there that will help you.

What I want to talk to you about today is something that's really important, is that there are things going on that just don't sound like we're in a recession. For instance, let me give you four bullet points having to do with labor and you can see whether you think this sounds like we're in a recession or not. When you look at the number that the media uses and the government likes to use, which is total non-farm labor, which includes private and government, there was an increase of 372,000 jobs from May to June. That's a pretty good jump. That boosted the amount of people working on a seasonally adjusted basis, which we do not like here at ITR, but it's the number they use so let's talk to it.

Seasonally adjusted basis of just shy of 152 million people, which is just a little below the February 2020 pre-COVID record high that we had for people working. So, we are almost back to full strength. That's pretty amazing. And the year over year growth rate for the month was 4.3%. That's a nice, healthy growth rate. Although, we are entering some phase C, slowing rate of rise on a 12, 12 basis. Now, if we just look at the private sector where everybody listening to my voice on this, it's the private sector that counts. The private sector in June posted a record high amount of people working. And the May to June increase was over 1.3 million jobs. So, we've never had more people working in the private sector than we did in June. And the year over year growth rate, the 1, 12, is at 4.8%.

Now, does that sound to you like we're in a recession with a record high amount of people working? Usually, it goes the other way. So what we have here is that you and I are seeing more people working than ever before, which by the way, that's important to keep in mind because wherever we go, we see help wanted signs. And we go, "Why aren't people working?" Well, we're at record high levels. It's just that the economy grew so much and is still growing and the labor pool is not growing fast enough that we see all these help wanted signs. And the job openings are at a record high on a 12 month moving total basis. It's absolutely amazing, but there are people working.

And what about the labor participation rate? Because that's been a point of discussion, we've discussed it. You've probably heard of it. So the second point to make today is that, does it sound like a recession if the labor participation rate is going up? Now, we're not seeing people go, "What's the point? There are no jobs." We're not seeing people go, "Oh, why bother?" We're seeing the labor participation rate, people over the age of 16, it's going up. And in June, it went to 62.5%.

Let me put that in context for you because a lot of movement in here can be small and be important. We had a high, six year high, in July 2019 of 63.6%. And we had a low in April 2020. That was a 47 year low of 60%. So, right here at 62.5 were edging back towards the high, 6 year high, we had before COVID, before the economy was slowing down. We have people going back to work, wanting to work, maybe needing to work, but nevertheless working. So all those help wanted signs, it's not because people are saying, "I don't want to work." It's because we need more people.

Third point I want to make to you is that wages are going up. The average hourly non-farm wage is a record high $32 and 8 cents an hour, a record high. That's pretty impressive on a year over year basis. Again, the 1, 12, it's 5.1% above this time last year, June 2022 to June 2021. When we look at the 12, 12, it's rising in phase B at 5.1%, although it may be approaching a cyclical peak. But nevertheless, wages are going up. That's not normal for a recession.

Now the last thing I want to point out to you is that real personal income minus transfer payment. So let me define that. Real personal income means it's adjusted for inflation. So, what I could quoted you just a moment ago, $32 and 8 cents. That includes inflationary increases that have been handed out. Now let's take all that out. Let's unpack that and we'll look at real wages in the country, real personal income in aggregate for the country. For June, it's a record high 14.502 trillion dollars. That's just an incredible amount of money.

And without transfer payments means we're taking out unemployment benefits. We're taking out retirement pay. We're taking out workers' comp, family assistance. We're taking out the non-service related, non-work related, income. So what we're looking at here are pure pay as opposed to benefits received for no services rendered. So, we're at record high levels despite inflation. Oh, isn't that something? Isn't that just amazing? So there are a lot of people working. We're earning more than we made before COVID. We've making more than we've ever earned before, as a nation, even adjusted for inflation.

I read somewhere recently that consumers are saying we're in a recession. Hmm, interesting. We're not making money like we're in a recession. We're not looking at it when we look at the amount of jobs being created. We're not looking at it when we look at retail sales on a deflated basis. We're not looking at it when we look at businesses on new orders for non-defense capital goods on a deflated basis. We're not seeing everything that's being talked about. These are just four simple points asking you, does this look like a recession to you?

People are working. They're making more. They're choosing to work and their real income, for all of us, is, adjusted for inflation, is above anytime we've been in the past. Sounds like pretty good news to me. I'm not saying things won't slow down because we think they will. That's been our long standing forecast, but a slowdown is not a breakdown, is not a meltdown. Hang in there. Watch your inventory levels. Stay active, stay aggressive. Work down any excess inventories you have. I think you're going to find that you're going to go through the next couple quarters just fine. And then later in 2023, you're going to see things picking up for yourself. Stay in touch. Follow us on our website. Look at our ITR trends report for your specific industry and I look forward to talking to you soon. I'm Alan Beaulieu, ITR Economics. Thank you.


Since 1948, we have provided business leaders with economic information, insight, analysis, and strategy. ITR Economics is the oldest privately held, continuously operating economic research and consulting firm in the US. With a knowledge base that spans six decades, we have an uncommon understanding of long-term economic trends as well as best practices ahead of changing market conditions. Our reputation is built on accurate, independent, and objective analysis.