The steady return of people to office may have helped fuel January’s surprise job surge, according to Gary Cohn, former director of the National Economic Council under the Trump administration.
Kohn, who is currently IBM’s vice-chairman, said those strong numbers, combined with cooling inflation, mean that “a recession is far from over for the first and second quarters of this year.” face the nation on Sunday.
Cohn pointed to January’s “stunning” jobs report as one reason for his optimism. US employers added 517,000 jobs last month, more than economists expected. Unemployment fell to 3.4%, the nation’s lowest rate in 54 years, despite widely publicized layoffs at tech companies such as Amazon, Alphabet and IBM.
Employment in the services sector increased, with employers in leisure and hospitality alone adding 128,000 jobs.
Kohn said the growth in services employment is driven by “the new normal,” including people going back to the office. Office occupancy rates across the US broke 50% in the week of January 25, according to Kastle Systems, which uses security card swipes to track attendance.
“Think of people going back to the office. They need a parking attendant. They need people to work the buildings. They need security. They need people to clean the buildings,” he said.
Even employees coming into the office for a short period of the week is enough to trigger an increase in service appointments. “There are enough days in the week in the office where you need the service sector to come back to work,” Cohn said.
Cohn’s assessment is in line with Wall Street banks, who think a US recession will hit in the second half of the year. JPMorgan and Citigroup both forecast a “mild recession” in the second half of the year. Investment bank Goldman Sachs is more bullish, giving only a 35% chance of a US recession. The International Monetary Fund predicted last week that the US economy would grow at 1.4% this year.
The US is also reporting cooler inflation. The overall US consumer price index fell 0.1% in December from the previous month, while core inflation – which excludes food and energy – rose 0.3%.
This good news is making some inflation watchers more optimistic that the US may expect a “soft landing”, where the US Federal Reserve keeps inflation under control without triggering a sharp contraction in economic activity.
“It looks like we’ll have a softer landing than we did a few months ago,” Larry Summers, the former Treasury secretary who has been hammering inflation over the past two years, said in a Sunday interview with CNN. Yet the economist still warned that some inflation indicators were “unimaginably high” and that “it would be wrong to say we are out of the woods.”
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