WASHINGTON (AP) — Defying anxiety about a possible recession and runaway inflation, U.S. employers added 528,000 jobs last month, restoring all of the jobs lost during the coronavirus recession. Unemployment fell to 3.5%, the lowest since the pandemic hit in early 2020.
Job creation in July was up from 398,000 in June and the most since February.
Friday’s searing Labor Department employment numbers come amid a growing consensus that the U.S. economy is losing momentum. The US economy contracted in the first two quarters of 2022 – an informal definition of recession. But most economists believe the strength in the labor market has kept the economy from slipping into a slowdown.
The surprisingly high employment figures will no doubt intensify the debate over whether or not the United States is in a recession.
“Recession – what recession?” wrote Brian Coulton, chief economist at Fitch Ratings, after the figures were released. “The US economy is creating new jobs at an annual rate of 6 million – that’s three times faster than what we normally see in a good year. ”
Economists expected just 250,000 new jobs this month.
The Labor Department also revised hirings for May and June, indicating that 28,000 additional jobs were created during those months. Job growth was particularly strong last month in the health care sector and in hotels and restaurants.
Hourly earnings posted a healthy gain of 0.5% last month and rose 5.2% over the past year, still not enough to keep up with inflation.
The unemployment rate fell as the number of Americans reporting they were employed rose by 179,000 and the number of people reporting being unemployed fell by 242,000. But 61,000 Americans left the labor force in July, reducing the share of those working or looking for work at 62.1% last month, down from 62.2% in June.
The strong jobs numbers are likely to encourage the Federal Reserve to continue raising interest rates to cool the economy and combat rising inflation. “The strength of the labor market in the face of … Fed rate tightening already this year clearly shows that the Fed still has work to do,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “Overall, today’s report should put the notion of a near-term recession on the back burner for now.”
There are, of course, political implications in the figures released Friday: voters are worried about rising prices and the risk of recession ahead of November’s midterm elections as President Joe Biden’s Democrats seek to keep the Congressional control. The surprisingly high number of hires will be welcomed at the White House.
The economic backdrop has been troubling: gross domestic product — the broadest measure of economic output — fell in the first and second quarters; Consecutive declines in GDP is one definition of a recession. And inflation is at its highest level in 40 years.
The resilience of the current labor market, particularly the low unemployment rate, is the main reason most economists don’t believe a downturn has started yet, despite growing fears that a slowdown not happen.
New Yorker Karen Smalls, 46, began looking for work three weeks ago – via job sites like ZipRecruiter and Indeed – as support staff for social workers who care for people with mental health problems.
“I didn’t realize how good the job market is right now,” she said shortly after completing her fifth interview this week. “You watch the news and see all these bad reports…but the job market is amazing right now.” let her take care of her two children.
The recession is not just an American problem.
In the United Kingdom, the Bank of England predicted on Thursday that the world’s fifth largest economy would fall into recession by the end of the year.
Russia’s war in Ukraine has clouded the outlook across Europe. The conflict has scarred energy supplies and driven up prices. European countries are bracing for the possibility that Moscow will continue to reduce — and possibly completely cut off — flows of natural gas, used to fuel factories, generate electricity and keep homes warm in winter.
If Europeans cannot store enough gas for the cold months, rationing may be demanded by industry.
Economies have been on a frantic race since COVID-19 hit in early 2020.
The pandemic has brought economic life to a virtual standstill, with businesses closing and consumers staying home. In March and April 2020, US employers cut 22 million jobs and the economy plunged into a deep two-month recession.
But massive government assistance — and the Fed’s decision to cut interest rates and pump money into financial markets — fueled a surprisingly quick recovery. Caught off guard by the strength of the rebound, factories, stores, ports and freight yards were swamped with orders and rushed to bring back workers they furloughed when COVID hit.
The result has been labor and supply shortages, delayed deliveries and rising prices. In the United States, inflation has been rising steadily for more than a year. In June, consumer prices jumped 9.1% from a year earlier, the biggest increase since 1981.
The Fed underestimated the resurgence of inflation, thinking prices were rising due to temporary supply chain bottlenecks. He has since recognized that the current wave of inflation is not, as it was once called, “transitional”.
Now the central bank is reacting aggressively. It has raised its benchmark short-term interest rate four times this year, with more rate hikes to come.
Higher borrowing costs weigh heavily. Rising mortgage rates, for example, cooled a hot housing market. Sales of previously occupied homes fell in June for the fifth consecutive month.
Property companies – including lending firm LoanDepot and online property broker Redfin – have started laying off workers.
Prior to Friday’s blockbuster hiring report, the labor market had shown other signs of instability.
The Labor Department reported Tuesday that employers posted 10.7 million job openings in June — a healthy number but the lowest since September.
And the four-week average number of Americans filing for unemployment benefits — an indicator of layoffs that smooths week-to-week fluctuations — rose last week to its highest level since November, although figures may have been exaggerated by seasonal factors.
“Underestimate the U.S. labor market at your peril,” said Nick Bunker, head of economic research at the Indeed Hiring Lab. “Yes, output growth could be slowing and the economic outlook has clouds on the horizon. But employers are still chomping at the bit to hire more workers. That demand may be waning, but it’s still hot in this moment. ”
Josh Boak in Washington and Courtney Bonnell in London contributed to this story.
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