July jobs report: Huge surprise as US economy adds 528,000 jobs

The massive monthly gain was more than double the 250,000 expected by economists, according to Refinitiv.

The unemployment rate fell to 3.5% after hovering at 3.6% for the past four months. July’s unemployment rate matched the half-century low last seen in February 2020.

Friday’s employment snapshot marks the 19th straight month of job growth and the highest monthly gain since the economy added 714,000 jobs in February. July’s job totals exceed the average monthly gain of 388,000 jobs over the past four months, according to BLS data.

On Friday, President Joe Biden hailed the July report and took a victory lap attributing the gains to his economic policies.

“This is the result of my economic plan to build the economy from the bottom up,” he said in a statement. “I ran for president to rebuild the middle class – there’s still work to do, but today’s jobs report shows we’re making significant progress for working families.”

Job gains at all levels – with one exception

Job growth was broad-based across all sectors, with health care and recreation and hospitality registering some of the largest gains. However, employment in this key service sector is still one million jobs below its pre-pandemic level, according to the BLS.

Of the 528,000 jobs added, the lion’s share of gains were in areas of private sector service delivery, including 122,000 in education and health services; 96,000 in the leisure and hotel industry (including 74,000 in restaurants and bars); and 89,000 in professional and business services.

Ahead of Friday’s report, which also included upward revisions totaling 28,000 jobs for May and June, the country was about 524,000 jobs short of the employment level seen in February 2020.

With a giant stroke, this gap was erased.

However, a notable lag persists: employment in the public sector, in particular municipal and regional administration and public education. Government-related jobs are 597,000 below where they were before the pandemic.

“There’s just really strong competition with the private sector right now, and the public sector hasn’t sustained its wage increases so they can compete with the private sector,” said Nick Bunker, director of economic research. from Indeed for North America, to CNN. Company.

There is still a shortage of workers

The participation rate fell to 62.1% from 62.2% in June, its third decline in as many months.

While the demand for labor remains incredibly strong, the supply of workers is not rebounding like it was earlier this year, Bunker said.

“There are fears that demand will remain very strong, but the ability or willingness of workers to accept jobs is not meeting the demand as well as some of us might have hoped,” he said. at CNN Business.

This imbalance has contributed to high levels of wage growth, he added.

In July, the average hourly wage increased by 0.5% compared to the previous month and by 5.2% compared to last year. Yet those gains are being overtaken by the highest inflation in 40 years.

Wage growth “certainly isn’t accelerating in a way that drives the kind of inflation we’re seeing in the economy,” said Elise Gould, senior economist at the Economic Policy Institute.

Economists expected the labor market to show some cooling as it not only moved closer to recovering the more than 20 million jobs lost during the pandemic, but also reflected a broader slowdown in economic activity. .

“Despite two consecutive quarters of GDP contraction in the first half of the year, these robust labor market numbers argue strongly against recessionary rhetoric,” Bankrate senior economics analyst Mark Hamrick said in a statement.

Double edged sword

This report, combined with the latest data that shows job openings still far exceed the number of people looking for work, could put pressure on the Federal Reserve to continue its aggressive rate hike streak. , he added.

“As [Fed Chair] Jerome Powell and his colleagues continue to view the labor market as hot, which remains on the ledger side forcing them to keep raising interest rates,” he said.

The Fed’s Monetary Policy Committee will then meet in late September, providing many more economic data points to add to the mix. The next big event is on Wednesday, when the BLS releases its painstakingly scrutinized monthly consumer price index data.

Analysts and economists said Friday they expect the Fed to raise rates by at least 75 basis points in September.

That made Friday’s strong jobs report a double-edged sword.

“What is normally good news for the economy, for example, more people employed and earning a salary, has become a symbol of concern as inflation continues to remain above the Fed’s target. “said Eugenio Aleman, chief economist at Raymond James, in a statement. .

And, in turn, the Fed’s aggressive actions could hit the most vulnerable Americans the hardest, EPI’s Gould said.

A sharp economic downturn “could prematurely slow the progress we’ve seen in the labor market,” she said. “And when you do that, it’s often some of the most racially and economically disadvantaged groups. [being affected].”

CNN’s Betsy Klein contributed to this report.


Cnn

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