US employers add 528,000 jobs, unemployment lowest since pandemic

July job creation 130,000 more than what was produced in June, and the highest since February.

Red-hot jobs numbers from the Labor Department on Friday come amid a growing consensus that the US economy is losing momentum. The US economy shrank in the first two quarters of 2022 – an informal definition of a recession. But most economists believe that a strong jobs market has kept the economy from slipping into recession.

Friday’s surprisingly strong report will undoubtedly intensify the debate as to whether the US is in recession.

“Recession – what recession?” Brian Colton, chief economist at Fitch Ratings, wrote after the numbers came out.

“The US economy is creating new jobs at an annual rate of 6 million – three times faster than what we typically see historically in a good year.’

Economists had expected only 250,000 new jobs this month.

Of course, Friday’s jobs numbers have political implications: Americans have become increasingly concerned about rising prices and the risk of a recession.

It will certainly be at the forefront of voters’ minds during the mid-term elections in November President Joe BidenThe US Democrats want to maintain control of Congress.

On Friday, Biden took credit for the resilient labor market, saying, “It’s a result of my economic plan.”

The president has boosted job growth last year through his $1.9 coronavirus relief package and $1 billion bipartisan infrastructure legislation. However, Republican lawmakers and some prominent economists point to government spending as the cause of current inflation levels not seen in 40 years.

And for millions of Americans, it’s the fading power of paychecks in the midst of rising inflation that remains front and center.

Hourly earnings posted a healthy growth of 0.5% last month and are up 5.2% over the prior year. That’s not enough to keep up with inflation, which means that many Americans, especially the poorest, are facing higher prices at supermarkets, gasoline stations and even school supplies.

“There’s more work to do, but today’s jobs report shows we’re making significant progress for working families,” Biden said on Friday.

Labour Department The May and June recruitments were also amended, saying an additional 28,000 jobs were created in those months.

Job growth was particularly strong last month in the healthcare industry and hotels and restaurants.

The unemployment rate declined as the number of Americans saying they were unemployed fell by 242,000. But 61,000 Americans dropped out of the labor force in July, reducing the share of those working or looking for work to 62.1% last month, from 62.2% in June.

While a strong job market is a good thing, it is also more likely that the Federal Reserve will continue to raise interest rates to cool the economy.

This dichotomy was displayed in US markets soon after the decline in the number of jobs.

Stocks slid on hopes the Fed would feel pressure to continue aggressive rate hikes, a threat to fast-growing companies like technology stocks. The S&P 500 dropped 0.7%.

Treasury yields jumped as traders scramble to place bets for big hikes at the Fed meeting next month. Of all the major US markets, the tech-heavy Nasdaq fell the most.

“The strength of the labor market clearly shows the Fed has more work to do, given the tightening from the Fed already this year,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

“Overall, today’s report should put on hold for the time being bearish sentiments in the near future.”

Yet the economic background is troubling: GDP – the broadest measure of economic output – fell in both the first and second quarters; A steady decline in GDP is one definition of a recession.

The resilience of the current labor market, particularly the low unemployment rate – is the biggest reason why most economists do not believe that the recession has just begun, although they increasingly fear that one is on the way.

New Yorker Karen Smalls, 46, began looking for work three weeks ago — through job sites like ZipRecruiter and Indeed — as support staff for social workers serving people with mental health issues.

“I had no idea how good the job market was right now,” she said shortly after finishing her fifth interview this week.

“You watch the news and see all these bad reports… but the job market is amazing right now.” A single mother, she is weighing several offers, which is closer to her home in Manhattan and paid enough. so that she can take care of her two children.

This is a far cry from the situation two years ago when the pandemic nearly brought economic life to a halt as companies shut down and millions remained at home. In March and April 2020, US employers cut a staggering 22 million jobs and the economy plunged into a two-month deep recession.

But massive government support – and the Fed’s decision to slash interest rates and pump money into financial markets – spurred a surprisingly quick recovery. Caught by the force of the rebound, factories, shops, ports and cargo yards were overwhelmed with orders and scrambled to bring back workers when COVID-19 hit.

The result has been shortages of workers and supplies, delayed shipments – and rising prices. In the United States, inflation has been rising steadily for more than a year.

In June, consumer prices rose 9.1% from a year earlier – the biggest increase since 1981.

The Fed underestimated the resurgence of inflation, thinking that temporary supply chain disruptions were causing prices to rise. It has since acknowledged that the current pace of inflation is not, as it was once called, “temporary”.

Now the central bank is responding aggressively.

It has raised its benchmark short-term interest rate four times this year, with further hikes in the rates.

Higher borrowing costs are taking a toll. For example, rising mortgage rates have cooled a more recent pillar of the US economy, the housing market. Sales of pre-occupied homes fell for the fifth straight month in June.

Real estate companies – including lending firm Loan Depot and online housing broker Redfin – have started laying off workers.

Ahead of Friday’s blockbuster hiring report, the labor market had shown other signs of volatility.

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 signing up for unemployment benefits — a proxy for layoffs that smooth out week-to-week swings — rose last week to the highest level since November, though the numbers were seasonal. factors may be exaggerated.

“Understand the US labor market at your own risk,” said Nick Bunker, head of economic research at the Indeed Hiring Lab.

“Yes, production growth may slow down and there is some cloud over the economic outlook. But employers are still champing a bit to hire more workers. That demand may have faded, but is still red hot.” (AP)

VM

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