Labour market vital signs indicate that it is getting sick, and the healthcare sector is one of the few things that keep it from getting worse.
The latest employment report shows that the US economy added just 22,000 jobs in August, indicating that June actually fell. Meanwhile, the unemployment rate was at a high of 4.3%, the highest in four years.
In a memo on Saturday, Torsten Sløk, chief economist at Apollo Global Management, observed that employment growth in sectors affecting tariffs was negative. The manufacturer alone cut 12,000 workers last month.
In contrast, the healthcare and social assistance sector added 46,800 jobs, while the leisure and hospitality industry added 28,000. In fact, they have done heavy lifts throughout the year. This is a trend that relates to Mark Zandy, chief economist in Moody's analysis.
“Arguably the most perplexing thing about the job market that flags is how dependent it is on healthcare and hospitality for little employment growth,” he wrote to X on Sunday. “From the beginning of the year, the economy has created just 600,000 jobs, but without the growth in employment in these industries, employment growth is zero.”
Data from the Bureau of Labor Statistics shows that in addition to annual profits in the healthcare and social assistance sectors, the total for the leisure and hospitality industry is 855,900. This means that if not these groups, the economy actually has over 250,000 jobs.
Zandi also pointed out that less than half of the industries tracked by BLS have been added to pay in the past six months, adding that “this will only happen when the economy is in a recession.”
The diffusion index in the job report measures the concentration of growth. Reading under 50 means that more industries cut jobs than added. In August it was 49.6, with a three-month average of 47.9.
“Work recession”
Zandi is steadily ringing alarm bells on the economy. Last month, after a shocking Jobs report in July, he warned that “the economy is on the cliff of a recession,” pointing to weak consumer spending and shrinking in construction and manufacturing.
After the August employment report was released on Friday, Zandy told Fortune's Eva Reutberg that the economy is on the edge of the recession and could already be in one.
He called for a June revision. This marked a loss of 13,000 jobs. This is especially important as recessions usually go back to the first month of a salary decline.
Meanwhile, the long-term unemployment rate has been high over the past year, with over 6 million people outside the workforce saying they want jobs from around 5.7 million people.
“This really feels like a job recession,” Zandy told Fortune. “Employment is declining. Production and income is still growing, but the economy is very fragile. There's nothing else wrong, or it could lean us into a complete recession.”
Certainly, for now the economy remains in a positive territory. GDP grew 3.3% in the second quarter, with Atlanta Fed's GDP tracker showing a 3% increase in the third quarter.
Earlier on Sunday, Treasury Secretary Scott Bescent was asked to respond to recession comments at Zandi's job.
In an interview with Kristen Welker on NBC's Meet the Press, he said there is a policy in place to produce good, well-paid jobs. Bessent also said the pay data collected in August was historically prone to major revisions, and he accused him of not cutting the Federal Reserve earlier.
“President Trump has been elected for change and we are trying to push for economic policies that set the economy right. We believe we will see significant acceleration by the fourth quarter,” he predicted.
