The US jobs market grew faster than expected in July, pushing employment back to pre-pandemic levels, hailed by President Joe Biden as he faces tough midterm elections – but one that sees sky-high inflation. But it also gives air to concerns.
Even the White House predicted job gains would slow last month, which Biden said was part of a natural decline after the world’s largest economy’s rapid rebound from pandemic recession .
Instead, US job growth picked up in July, as the economy added an astonishing 528,000 positions, more than double what economists expected, according to official data released Friday. This took the unemployment rate back to the pre-pandemic level of February 2020.
“Today, the unemployment rate is the lowest in more than 50 years: 3.5%,” Biden said in a statement.
“There are more people working than at any time in American history … there’s more work to be done, but today’s jobs report shows that we are making significant progress for working families.”
On top of a surge in hiring last month, the Labor Department report said job gains in June were revised upwards as much as in May, adding a total of 28,000 positions to preliminary figures.
Meanwhile, a closely watched report shows that wages jumped in July — a 15 cents increase in average hourly earnings since June — amid concerns about a potential wage-price spiral. In the past 12 months, average hourly earnings have increased by 5.2 percent.
This bodes well for families who are struggling to meet their needs as they face rising prices for groceries and gas, but it could push companies further up.
With inflation top nine percent, the highest in more than 40 years, the Federal Reserve is aggressively raising interest rates to cool the economy, and economists say three consecutive quarter-point increases in September is likely to.
‘very nice’
With recent data showing that GDP shrank for the second quarter in a row – leading many to say the economy is in recession – US stocks were gaining ground due to investor optimism that the Fed was trying to fight its inflation. will be able to dial back.
But Wall Street opened sharply lower after the jobs report, amid concerns of an impending rate hike.
With the latest increase, total non-farm employment returned to its pre-pandemic levels, data showed, and more than 430,000 were recruited in the past three months.
KPMG economist Diane Swank’s initial response: “Wow.”
“This report pushes the Fed towards a move of 75 basis points again in September,” she said on Twitter.
From zero at the start of the year, the Fed has raised the benchmark lending rate four times, and has pledged to continue its war on inflation.
And central bankers made it clear this week that investor optimism about a potential downshift was misplaced.
“The slowdown is nothing less than a worry now. Inflation is a concern,” tweeted Harvard economist Jason Furman. “The Fed will need to do more.”
The central bank will receive two more employment reports and several inflation reports before its next policy meeting in mid-September.
While employers have been struggling to find workers for months – with about two open positions for every unemployed person in the workforce – job gains continue to rage.
Hiring was strong in leisure and hospitality and health care, with each increasing by 96,000 or more in July, while manufacturing and construction grew by at least 32,000.
Builders in particular have been under pressure as they struggle to meet the high demand for construction, especially homes, but employment in the sector is now back to its pre-pandemic levels, the report said.
But there were also signs of tension. The number of people working part-time for economic reasons, which declined sharply in June, resumed in July. And a growing number of workers are taking second jobs, including 403,000 with two full-time positions.
The share of people in the labor force is stuck at around 62 per cent, and some economists are pointing to the long-term impact of Covid, potentially putting workers on edge.
Katherine Bach of the Brookings Institution said she believes four million people could be stopped from work because of the impact of COVID-19.
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