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As everything else in the U.S. economy is down, job numbers are up

SCOTT SIMON, HOST:

Inflation is up. That's clear enough at the pump or in the checkout line at the grocery store. Sentiment is down, at least according to economic surveys, and yet businesses are hiring, hiring, hiring, leaving the unemployment rate near pre-pandemic lows. What exactly is going on? Can we trust these numbers? NPR chief economics correspondent Scott Horsley joins us now. Thanks for being with us.

SCOTT HORSLEY, BYLINE: Good morning. Good to be with you, Scott.

SIMON: And the Friday report was much stronger than what the forecasters had expected. And what does that tell us about the economy?

HORSLEY: If you looked at the jobs report in isolation, you would think this is an economy that is booming. Employers added 372,000 jobs in June. That's solid by any measure. In fact, employers in the private sector actually have more people on payrolls now than they did before the pandemic. So that's really positive. But other economic measures tell a somewhat different story. Consumer spending has softened a bit. The stock market, we all know, is in a slump. GDP, the broadest measure of economic activity, actually declined in the first three months of the year and possibly in the last three months as well. Jason Furman, who was a top economist in the Obama White House, says this is a really weird disconnect.

JASON FURMAN: Normally, GDP and jobs growth go up together or GDP and jobs both go down together. But right now, you have an unusual situation where GDP might be going down at the same time that jobs are going up.

HORSLEY: Furman has a number of theories about what might be going on here. It could be workers are less productive right now. Many people, of course, are working from home, and some have COVID complications or whatever. So it could be that even though more people are working, they're not generating as much economic activity as you would expect. It could also be that some employers are hiring workers they don't necessarily need right now because they've had so much trouble hiring in the past that they want to have staff on hand when the economy picks up. And finally, it's possible that one or the other of these statistical measures is just wrong.

SIMON: So are economists like Jason Furman putting more stock in some indicators than others?

HORSLEY: Furman is a little more confident about the jobs numbers. Now, they do get revised over time. The initial job counts for April and May were reduced yesterday, but even after they were marked down, they still showed really solid job growth. Furman is a little bit more skeptical about the GDP numbers. He thinks they may be understating the strength of the economy, at least up to this point.

FURMAN: It seems quite clear that the economy was not in recession in the first half of 2022. I have a certain amount of optimism about the second half of 2022, but there's just so much uncertainty and confusion that one shouldn't overstate one's confidence about anything, at least about the future right now.

HORSLEY: Furman is channeling that line, often attributed to Yogi Berra, you know, that predictions are tough, especially about the future. And that is doubly true in this weird pandemic and battle-scarred economy.

SIMON: The jobs report also showed that wages are going up, but, of course, so are the prices of goods and services. So how does that affect the outlook?

HORSLEY: Yeah, high inflation is definitely weighing on people's attitudes. It's been eating into their spending power. And that's a big reason that consumers are so anxious about the economy. We have seen some slowdown in wage gains since last year. What would be helpful is if inflation also slows down. So even if you're getting a smaller pay raise, it would actually go further at the gas station or the grocery store. In the meantime, shoppers have been dipping into savings to support their spending habit. Some people are putting more spending on credit cards. Obviously, Scott, you can do that for a while, but not indefinitely.

SIMON: Scott, what do you think about these numbers?

HORSLEY: Look; government statisticians work really hard to get this right. They are doing their best. But it has been even harder than usual to measure the U.S. economy during the pandemic. Things are just really strange right now. Over time, I think we will be able to tell a coherent story about what's going on. But when you're in the middle of a storm, sometimes it's difficult to know exactly which way the wind is blowing.

SIMON: NPR's Scott Horsley, thanks so much.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.