U.S. employers added a booming 528,000 jobs in July as the labor market now has recovered all 22 million jobs lost in the COVID-19 pandemic and continued to defy soaring inflation, rising interest rates and a slowing economy.
The unemployment rate fell from 3.6% to 3.5%, matching a 50-year low reached just before the pandemic began in early 2020, the Labor Department said Friday.
Economists had estimated that 250,000 jobs were added last month, according to a Bloomberg survey.
“The economy is not falling into recession,” says Brian Bethune, an economist at Boston College. “It is actually picking up speed as demand for services accelerates in a post COVID-19 environment.”
Inflation hits middle class:How inflation’s wrath, recession fears are (quickly) creeping into middle-class America
Where did jobs increase in July?
July’s payroll increases were broad-based. Leisure and hospitality, which includes restaurants and bars, the sector hit hardest by COVID-19, led the job gains with 96,000. Professional and business services added 89,000 jobs; health care, 70,000; construction, 32,000; manufacturing, 30,000; and retail, 22,000 jobs.
Federal, state and local governments added 57,000 jobs.
The employment recovery, however, masks divergent narratives for the public and private sectors. While businesses recouped all jobs lost in June and are now 629,000 positions above the pre-COVID-19 level, government is still nearly 600,000 jobs below that benchmark.
That’s mostly because state and local governments haven’t been able to provide the pay increases, remote work options and flexible hours offered by the private sector since the pandemic began in spring 2020.
In addition to July’s robust payroll gains, average hourly earnings rose 15 cents to $32.27, pushing the annual increase from 5.1% to 5.2% and threatening to intensify inflation pressures.
And the portion of Americans working or looking for jobs fell from 62.2% to 62.1%, well below the pre-pandemic level of 63.4%. That share had been rising as workers returned to a favorable labor market after caring for children or staying idle because of COVID-19 fears. But it has broadly edged down after hitting a peak in March, suggesting widespread labor shortages could persist and push pay increases higher.
Overall, the blockbuster report increases the odds that the Fed will raise its key interest rate by three-quarters of a percentage for a third straight meeting in mid-September to fight soaring inflation, says economist Michael Pearce of Capital Economics.
Inflation hit a 40-year high of 9.1% in June. The higher prices and borrowing costs have led consumers and businesses to slow spending and have stoked recession fears.
The labor market, however, remarkably has shrugged off the inflation spike, rising interest rates and an economy that has contracted for two straight quarters, adding an average 437,000 jobs a month since May. Because of the labor shortages, companies have been hesitant to let workers go and continue to add staffers to meet the demands of a reopening economy.
Jason Scott plans to bring on about 25 new employees this year at 120VC, his company that manages projects for businesses, and three at Brick & Matter, his marketing firm. Despite the recession chatter, clients are still catching up after scrapping projects during the pandemic, he says. Plus, he says, the recent flurry of layoffs have provided him a fresh pool of talented employees.
“I’m going to roll the dice,” he says.
There are signs the job market could soon soften. Last week, initial jobless claims, a gauge of layoffs, rose to the highest level since November based on a four-week moving average. Tech giants such as Oracle, Amazon, Netflix and Robinhood have announced significant job cuts recently. And job openings fell to a still-strong 10.7 million in June from a near-record 11.3 million the previous month.
Also, payroll growth is expected to downshift now that the U.S. has recouped all 22 million jobs lost in the health crisis.
Some employers are dialing back their hiring plans.
Michael Hobbs, president of Chicago-based PahRoo Appraisal & Consultancy, had planned to add about 20 employees this year. Instead, he says, he’s adding half that number because higher mortgage rates have triggered a sharp slowdown in home sales and refinancing.
Hobbs’ commercial business is still healthy and the need for appraisals is increasing, but he’s wary. “We would be growing a lot faster if not for the recession talk,” he says.
Leave a Reply