In June, the government reported 206,000 jobs created, but also posted downward revisions in the prior two months employment reports of 111,000. Over half of the June jobs reported were in government, health care, and social services, indicating that private sector job creation has been slow. Main Street firms are facing record levels of job openings that they are struggling to fill, despite reports of historically high compensation increases. With a growing workforce in the government sector, the supply of workers available for private sector employment is reduced.
Productivity on Main Street is suffering due to anemic capital investments, which are essential for advancing business operations. Capital spending has been limited, as very few owners see better business conditions over the next six months and financing purchases has become more expensive. Inflation remains the number one business problem, impacting real wages and leaving businesses struggling to retain their workers. Despite higher wages, the real wages have decreased by 2 percent since 2020.
The Administration is touting GDP and employment growth, but private sector measures are less convincing about the strength of the economy. Many uncertainties, including the possibility of the economy slipping into recession, will be resolved in the next few months. Regular monthly data will reveal developments, but it may be necessary to look beyond the headlines to understand the true state of the economy and its reliance on government spending for growth.
The lack of qualified applicants has caused employment on Main Street to remain stagnant, despite reports of high compensation increases. The dependency on government spending for job creation has led to concerns about the economy’s overall strength and its ability to sustain growth. Inflation and labor quality remain top concerns for small businesses, impacting their ability to attract and retain workers. The lack of capital investments and uncertainty about future business conditions are further hindering productivity gains on Main Street.
