Employment (from the LA Times and the Associated Press): In sign of economy’s vigor, U.S. added 206,000 jobs in June. Employers delivered another solid month of hiring, displaying capacity to withstand elevated interest rates. By Paul Wiseman
America’s employers delivered another healthy month of hiring in June, adding 206,000 jobs and once again displaying the U.S. economy’s ability to withstand high interest rates. Last month’s job growth did mark a pullback from 218,000 in May. But it was still a solid gain, reflecting the resilience of America’s consumer-driven economy, which is slowing but still growing steadily.
Still, Friday’s report from the Labor Department contained several signs of a slowing job market. The unemployment rate ticked up from 4% to 4.1%, a still-low number but the highest rate since November 2021. The rate rose in large part because 277,000 people began looking for work in June, and not all of them found jobs right away.
The government also sharply revised down its estimate of job growth for April and May by a combined 111,000. And it said average hourly pay rose just 0.3% from May and 3.9% from June 2023. The year-over-year figure was the smallest such rise since June 2021 and will probably be welcomed by the Federal Reserve in its drive to conquer inflation.
In addition, just two sectors — government and a category that includes healthcare and social assistance, neither of which captures the economy’s underlying strength — accounted for roughly three-quarters of June’s job growth.
Economists also noted that job growth from April through June averaged 177,000, a decent figure but still the lowest three-month average since January 2021.
Other economists, while agreeing that the job market is slowing, suggested that it remains resilient.
The state of the economy is weighing heavily on voters’ minds as the presidential campaign intensifies. Despite consistent hiring, relatively few layoffs and gradually cooling inflation, many Americans have been exasperated by still-high prices and assign blame to President Biden.
Economists have been repeatedly predicting that the job market would lose momentum in the face of the high interest rates engineered by the Fed, only to see the hiring gains show unexpected strength. Still, signs of an economic slowdown have emerged in the face of the Fed’s series of rate increases. The U.S. gross domestic product — the total output of goods and services — grew at a lethargic annual pace of 1.4% from January through March, the slowest quarterly pace in nearly two years.
Consumer spending, which accounts for about 70% of U.S. economic activity and which has powered the expansion the last three years, rose at just a 1.5% pace last quarter after growing more than 3% in each of the previous two quarters. In addition, the number of advertised job openings has declined steadily since peaking at a record 12.2 million in March 2022.
At the same time, while employers might not be hiring so aggressively after having struggled to fill jobs the last two years, they aren’t cutting many either. Most workers are enjoying an unusual level of job security.
Meanwhile, inflation has steadily declined from a 9.1% peak in 2022 to 3.3%. In remarks this week at a conference in Portugal, Fed Chair Jerome H. Powell noted that price increases in the United States were slowing again after higher readings earlier this year. But, he cautioned, further evidence that inflation is moving toward the Fed’s 2% target level would be needed before the policymakers would cut rates.
Most economists think the Fed will begin cutting its benchmark rate in September, and the details in Friday’s jobs report did nothing to counter that expectation.
Winners and Losers in California Budget Deal BY LYNN LA for CALMATTERS: With Gov. Gavin Newsom and the Democratic-led Legislature coming to a budget agreement on Saturday, some winners and losers of the spending plan have become clear.
As CalMatters Capitol reporter Alexei Koseff explains, many programs saw funding cuts, deferrals and delays to find $46.8 billion in fiscal solutions and balance the budget. The effort, according to the governor and legislative leaders, preserves California’s vast social safety net.
Some winners include:
- Local homelessness efforts: The budget includes $1 billion for the sixth round of local homelessness funding. San Diego Mayor Todd Gloria said in a statement that the funding allows cities to “expand shelter capacity, grow street outreach teams, and build more temporary and permanent housing options.” Cities are also expected to receive $250 million over the next two years towards clearing homeless encampments.
- Child care advocates: Hoping to create over 200,000 additional subsidized openings at child care facilities by 2028, the budget restores funding for 11,000 new slots. In a statement, Child Care Providers United praised the move: The budget protects “families’ child care access and early education for our youngest learners.”
- Middle-class scholarship recipients: Though a program that provides financial aid to low- and middle-class college students will have a planned reduction of $110 million a year starting in 2025-26, a one-time $289 million boost to a total of $926 million remains intact for 2024-25. Newsom in May proposed to slash it down to $100 million annually, a would-be blow to California’s plans to make college debt-free.
- Public universities: The University of California and California State University will each receive about $100 million to $160 million in additional state base funding in 2024-25, with plans for a mix of funding cuts and deferrals the following two years that’ll be restored in 2027-28. The deal allows the systems to spend another year preparing for relatively leaner times.
And some losers:
- Affordable housing advocates: In a blow to efforts helping to ease the state’s housing shortage, the budget plan includes cutting $1.1 billion from various affordable housing programs.
- Health care workers: Not only will $746 million be cut from health care workforce development programs, but the budget delays even further a $25 hourly wage hike for health care workers. The pay raises were supposed to begin June 1, but now will be pushed back until at least October. Learn more about the wage hike in CalMatters’ FAQ.
- Cal Grant recipients: A proposal to grow Cal Grant, the state’s key financial aid program, by $245 million has been scrapped. The expansion would have added 137,000 more students by fall 2024. A pared-down plan to expand it to 21,000 more students also didn’t make the final deal.
- Climate change advocates: The plan guts $9 billion from the $54 billion spending package approved two years ago for key climate programs.
Commercial Real Estate, From the New York Times: Fearing Losses, Banks Are Quietly Dumping Real Estate Loans-If landlords can’t pay back loans on office buildings, the lenders will suffer. Some banks are trying to avoid that fate.
Some Wall Street banks, worried that landlords of vacant and struggling office buildings won’t be able to pay off their mortgages, have begun offloading their portfolios of commercial real estate loans hoping to cut their losses.
It’s an early but telling sign of the broader distress brewing in the commercial real estate market, which is hurting from the twin punches of high interest rates, which make it harder to refinance loans, and low occupancy rates for office buildings — an outcome of the pandemic.
Late last year, an affiliate of Deutsche Bank and another German lender sold the delinquent mortgage on the Argonaut, a 115-year-old office complex in Midtown Manhattan, to the family office of the billionaire investor George Soros, according to court filings.
Around the same time, Goldman Sachs sold loans it held on a portfolio of troubled office buildings in New York, San Francisco and Boston. And in May, the Canadian lender CIBC completed a sale of $300 million of mortgages on a collection of office buildings around the country.
In terms of both number and value, the troubled commercial loans that banks are trying to offload are a sliver of the roughly $2.5 trillion in commercial real estate loans held by all banks in the United States, according to S&P Global Market Intelligence.
But these steps indicate a grudging acceptance by some lenders that the banking industry’s strategy of “extend and pretend” is running out of steam, and that many property owners — especially owners of office buildings — are going to default on mortgages. That means big losses for lenders are inevitable and bank earnings will suffer.
Banks regularly “extend” the time that struggling property owners have to find rent-paying tenants for their half-empty office buildings, and “pretend” that the extensions will allow landlords to get their finances in order. Lenders also have avoided pushing property owners to renegotiate expiring loans, given today’s much higher interest rates.
But banks are acting in self-interest rather than out of pity for borrowers. Once a bank forecloses on a delinquent borrower, it faces the prospect that a theoretical loss could turn into a real loss. A similar thing happens when a bank sells a delinquent loan at a substantial discount to the balance owed. In the bank’s calculus, though, taking a loss now is still better than risking a deeper hit should the situation deteriorate in the future.
The problems with commercial real estate loans, while bad, have not yet reached a crisis level. The banking industry most recently reported that just under $37 billion in commercial real estate loans, or 1.17 percent of all loans held by banks, were delinquent — meaning a loan payment was more than 30 days overdue. In the aftermath of the financial crisis of 2008, commercial real estate loan delinquencies at banks peaked at 10.5 percent in early 2010, according to S&P Global Market Intelligence.
Summer Jobs (by Laura Kelly for The Atlantic): Summer vacation: a time when many teens head to their gigs as camp counselors, cashiers, ice-cream scoopers, or—if they’re lucky, as I was one summer—pencil pushers in an air-conditioned local office.
The summer job is a chance for teens to make money, learn new skills (even if the learning is interspersed with heavy doses of drudgery), and stay busy in the months between school years. In the 1970s and ’80s, working at least part-time in the summer was the norm for teenagers, but the teen job became much less popular in recent decades, especially after the Great Recession made employment harder to come by.
Now summer jobs are so back. Since the tight labor market of 2021 pushed entry-level wages up and left businesses with a tranche of openings to fill, more and more young adults have been clocking in. About 38 percent of 16-to-19-year-olds were either working or looking for work in May, according to federal data released earlier this month—rates that, until this year, hadn’t been seen since the summer of 2009. Teen labor-force participation has been up year-round in recent years but has tended to spike in the summer months.
Job prospects were bleak for teens (and many adults) in the summer of 2020. But in 2021, as a gusher of government checks, a.k.a. “stimmies,” flowed through the economy and the “Great Resignation” was in full swing, teen workers were suddenly in high demand. Many adults were quitting gigs to move to higher-paid ones or, having been laid off, were waiting to find a good job while flush unemployment checks supported them. Hospitality bosses, in particular, were desperate for laborers—so desperate that they were willing to pay inexperienced teens to come in and work. The pattern has continued in the years since: A persistently tight labor market means that workers are still needed—and inflation means that teens both want and need more money. (Demand for summer workers is down from last year but still well above where it was in 2019.)
As the hometown summer job flourishes, the corporate summer internship is flagging. Nick Bunker, an economist at the Indeed Hiring Lab, told me that he’s noticed a real disparity in job postings: Compared with pre-pandemic levels, general demand is higher for traditional seasonal jobs such as summer-camp counselors—but not for for internships in corporate, white-collar settings.
Because teens are plugging holes in the broader workforce, the new teen summer job is not only better-paid than those of generations past; it may also come with more responsibility. Now, in addition to the classic entry-level seasonal fare—think: lifeguard—teens are getting hired for jobs that previously went to more experienced workers—think: retail manager. “We’ve seen employers rediscover teenagers,” Alicia Sasser Modestino, an economist at Northeastern University, told me, adding that some employers are bringing back teens for repeated summers and giving them more responsibility each year. Some teens end up parlaying these high-school job experiences into postgraduation roles. Still, Modestino said, not every job setting is appropriate or safe for young people. Issues with teen jobs can range from the relatively mild—a young person misses out on time with friends—to the genuinely dangerous: Some workplaces have illegally overscheduled teens, and some states are moving to weaken child-labor protections.
Job opportunities for teens are not always distributed equally. White teens tend to see higher rates of employment, even as their Black and Hispanic peers have also been looking for work. Lately, in this very strong job market, “we’re seeing those racial differences narrow, but they’re still not narrowing enough to get us to a point of equality,” Modestino explained.
Young people have caught a lot of flak over the past decade for supposedly being lazy and not wanting to work. But the surge in teens working over the past few years shows that when they’re offered good opportunities to work and make money, many will go for it. Teens, Bunker said, are living proof of his riff on the Field of Dreams principle: “Raise the wages; they will come.”