The economy added 528,000 jobs in July, beating expectations

(The Hill) – The US added 528,000 jobs and the unemployment rate fell to 3.5 percent in July, according to data released Friday by the Department of Labor, a stunning gain that defied predictions of a slowdown.

Economists expect the U.S. to have added about 250,000 jobs in July and keep the unemployment rate at 3.6 percent, according to consensus estimates released ahead of the report.

But the economy added more than twice the number of jobs that experts predicted, even as consumer confidence fell and gross domestic product shrank in the first half of the year. The unemployment rate also returned last month to its pre-pandemic level of 3.5 percent, which in February 2020 set a 50-year unemployment rate.

The surprising July job gains will raise questions about how close the U.S. economy really is to recession after months of concern over the sharp gains. The resilience of the labor market also means that the Federal Reserve may have more room – or at least feel more pressure – to quickly raise interest rates and fight inflation without fear of triggering steep job losses.

“If you thought the economy was in recession, you were wrong. Demand for workers skyrocketed in July, far exceeding expectations. Paired with falling gas prices, the economic outlook for the third quarter is starting to look better,” wrote John Leer, chief economist at Morning Consult. , in Friday’s analysis.

“Today’s numbers also raise the possibility of more aggressive rate hikes by the Fed as it tries to tame inflation, and downside risks continue to increase over the course of the year.”

July’s job gains have now brought the total number of Americans employed back to their level before the start of the 2020 COVID-19 pandemic, which eliminated about 21 million jobs in two months. Most of the new jobs came in service sector industries that have struggled to meet stimulus-driven consumer demand.

The leisure and hospitality sector, which is still below pre-pandemic employment levels, led all other industries in job growth with a gain of 96,000 jobs. Restaurants and bars added 74,000 jobs alone.

Professional and business services firms added 89,000 jobs in July and employed nearly 1 million more workers than before the pandemic. Health care jobs rose by 70,000 and government jobs rose by 57,000 in July, helping those sectors continue to recover jobs lost to COVID-19.

Even sectors of the economy hit hard by the Fed’s higher interest rates and high inflation showed notable employment results.

Construction employment rose by 32,000 in July, retailers added 22,000 jobs, and transportation and warehousing added 21,000 jobs.

“Strong employer demand continues to support solid, and increasing employment benefits. With fears and ongoing debate about recession, the labor market does not appear to be on the brink of recession,” wrote Daniel Zhao, senior economist at Glassdoor, in an analysis Friday.

“The labor market remains a pillar of strength, holding the economy together even as the economy slows,” he wrote.

July’s impressive job gains could give President Biden and Democrats a useful boost with just three months until the November midterm elections. While election forecasts expect Democrats to lose their majority in the House of Representatives, stronger confidence in the economy could help Biden’s party limit its losses in the lower house and preserve — or even expand — its Senate majority.

The Department of Labor also revised in May and June job gains up by a combined 28,000 jobs, meaning that the US has added a total of 1.3 million jobs over the past three months.

“More people are working than at any time in American history. That’s millions of families with the dignity and peace of mind that paychecks provide. And, that’s the result of my economic plan to build the economy from the bottom up,” Biden said in a statement Friday.

“I’m running for president to rebuild the middle class — there’s more work to be done, but today’s jobs report shows we’re making significant progress for working families,” he said.

While the July jobs report is a welcome respite from recession fears for Biden, there are still serious risks lurking in the economy that could change the picture before the midterm elections.

Labor force participation remained almost stagnant in July, which is a little relief for businesses competing to fill jobs from a labor force still 1.3 percent smaller than in February 2020. Wages also increased by 5.2 percent over the past year, a fast clip that some economists. fear will fuel high inflation.

The Fed has been raising interest rates since March with the goal of slowing job growth to a pace that won’t push inflation higher or force businesses to quickly raise wages. A slower economy will also force businesses to avoid raising prices as consumers have less financial room to chase inflation.

The lack of a slowdown in job growth in July is expected to push the Fed to hike rates even faster, which risks shocking the economy into a recession.

“The Fed will not take solace in strong job numbers. Policymakers’ priority is to cool wage and price pressures, so they want to see unemployment higher,” Mark Zandi saidchief economist at Moody’s Analytics, in a tweet Friday.

“It will take monthly job gains below 100k for a while. The Fed will get what they want in the coming months,” he said.

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