The Bureau of Labor Statistics publishes two sets of employment data every month.

The nonfarm payroll report tallies the number of jobs created or lost in the past month. Data is compiled by surveying business establishments. According to this report, 206,000 new jobs were created in June. Over the past year, 2.6 million new jobs were created.

The household survey tallies the number of people with jobs. According to this report, 116,000 more people were employed in June compared to the number employed in May. Over the past year, only 195,000 more people found work even though 1 million people entered the labor force. The unemployment rate increased from 3.6% to 4.1%.

How do 195,000 people fill 2.6 million new jobs? They don’t.

Survey error is one possible explanation for the discrepancy. The response rate for the establishment survey has fallen. In addition, the bureau uses a “birth-death” model to guess whether new businesses are adding more jobs than business failures are subtracting.

Another partial explanation may be an increase in the number of people working multiple jobs.

In any event, both surveys feed into the “soft landing” vs. “recession ahead” debate. Both are among the criteria which the National Bureau of Economic Research uses to determine whether the economy is in recession. Perhaps most importantly, a Federal Reserve Board study found that a 10% increase in the unemployment rate — which has now occurred — coincided with the onset of a recession in 6 of the 10 instances since 1963.

The increase in unemployment joins other harbingers of recession like the inverted yield curve, the dissipation of COVID-19 stimulus, rising consumer debt and elevated loan delinquencies. Put it together and a recession leading to still higher unemployment appears more likely than not.

What is the Federal Reserve Board doing about its mandate to promote full employment? Nothing. The Fed is obsessed with the other half of its mandate — promoting stable prices. On this front, the battle seems to be won. Personal Consumption Expenditure (PCE) inflation in May came in at less than 0.1%. The year-over-year rate increase is 2.6% and falling. Consumer prices in June declined by 0.1%. This comes on the heels of the May report showing no change in prices. The year-over-year change is a non-scary 3% and falling.

Both figures are firmly on the path to reducing annual inflation to the 2% goal set by the Fed.

Rather than declare victory, the Fed is keeping its short-term interest rate at 5.25%. This is far above the current rate of inflation. It is also significantly above the Fed’s estimate of the 2.75% rate that is neither economically stimulative nor contractionary.

Today’s contractionary rates are negatively affecting everything from the housing market to automobile purchases to everyday spending funded with credit card debt. If, as Fed Chair Powell continually preaches, interest rate policy operates with “long and variable lags,” the Fed should use the occasion of its meeting next week to start cutting interest rates now.

Jeffrey Scharf welcomes your comments. Contact him at jeffreyrscharf@gmail.com.