Welcome to Jobs Day, where we’re expecting to learn that the U.S. economy turned out another solid month of employment growth in July. It could be the latest in a string of data points that have pushed economists to scrap their recession forecasts, though risks including rising gasoline prices loom. Let’s get into it. What the experts predict Economists generally expect the July numbers to show an increase of about 200,000 jobs and an unemployment rate of about 3.6 percent. That would be a near-repeat of June. It would also support the belief that the economy is cooling but not at risk of major layoffs as the Federal Reserve weighs raising interest rates even more to fight inflation. Things seem OK, but do voters feel it? No. About 51 percent of Americans believe the economy is in a downturn and getting worse, according to a CNN poll released Thursday. CNN polling reveals that 63 percent of Americans disapprove of President Joe Biden’s handling of the economy, with a majority of voters dissatisfied since late 2021. It’s at odds with a number of key economic indicators. The so-called misery index — the combination of the U.S. unemployment and inflation rates — has been falling for about a year. In June it hit its lowest level since March 2020. Bank of America this week became the first large Wall Street bank to reverse its forecast that the U.S. will experience a recession. It’s joining the camp that believes the Fed can pull off a “soft landing.” “People are employed, they have money, they are spending money,” Bank of America CEO Brian Moynihan said in a Bloomberg Television interview. “It looks like we are reaching a pretty good equilibrium.” What could go wrong? Potential warning signs are showing up in manufacturing, banking and energy. Manufacturing activity contracted in July for the ninth consecutive month, while manufacturing employment hit its lowest level since July 2020, according to the Institute for Supply Management. A Fed survey showed banks expect to tighten credit standards across all loan categories in the second half of the year, after they pulled back on commercial and industrial lending. Deutsche Bank Research said the four previous times the survey showed such tightening were all associated with recessions. The bigger threat in the near term is shaping up to be rising gasoline prices, driven in part by global oil supply cuts and a U.S. heat wave that’s curtailed refinery output (keep in mind refineries are essentially giant, volatile chemistry sets). The national average gasoline price Thursday was $3.28, more than 28 cents higher than a month ago. Oil prices rose Thursday after Saudi Arabia extended production cuts ahead of an Opec+ meeting today. “We’re going to be going from disinflation potentially back to inflation when we talk about the price of gasoline — that’s something that could happen as soon as September,” GasBuddy analyst Patrick De Haan said in a new POLITICO piece on what’s happening at the pump. “[Fed officials] shouldn’t put their guard down when it comes to energy prices.” Happy Friday — We hope you have a relaxing August weekend. If you get bored, please reach out: Zach Warmbrodt, Sam Sutton.
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