US economy adds 528,000 jobs in July, subverting past expectations

U.S. job growth unexpectedly picked up in July, ignoring concerns about a slowdown in jobs, even as the labor market faces the twin threats of blistering inflation and rising interest rates.

Employers added 528,000 jobs in July, the Labor Department said in its monthly payroll report released on Friday, exceeding the 250,000 jobs forecast by economists at Refinitiv. Meanwhile, the unemployment rate he dropped slightly to 3.5%. This is his lowest level since the COVID-19 pandemic began more than two years ago.

The US is now replacing all the jobs lost during the pandemic.

Job gains were broad-based in July, with leisure and hospitality leading hiring, adding 96,000 new workers. They were followed by professional business services (89,000), healthcare (70,000) and government (57,000). The construction industry created 32,000 jobs for him and the manufacturing industry employed 30,000 of him.

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Hiring is rising as the Federal Reserve hikes interest rates for the first time in decades, works to curb inflation and a growing consensus that the economy is losing momentum. . The Commerce Department reported last week that gross domestic product, the broadest measure of domestically produced goods and services, fell 0.6% in the three months from April to June. After that, he fell 1.6% in his first three months of the year.

The economy meets the technical criteria for a recession as GDP continues to fall each quarter.

Many economists argue that a strong job market is keeping the U.S. from slipping into recession, but job growth is slowing as companies cut jobs to meet lower demand. Momentum is expected to slow significantly in the coming months.

Jobless claims have started to rise steadily in recent weeks, and a number of companies, including Alphabet’s Google, Walmart, Apple, Meta, Robinhood and Microsoft, have announced job freezes or layoffs in recent weeks. increase.

Gary Schlossberg, global strategist at Wells Fargo Investment Institute, said: “July employment surged to 528,000, the most since December. He underscored his support and put the economy on a slower trajectory toward recession.” .

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An incredibly tight labor market is partly contributing to record high inflation. As millions of workers experience the biggest wage increases in years. This is the result of companies competing with each other for a limited number of employees. July revenue increased 5.2% year-on-year, well above the pre-pandemic average of 3%. Wages rose 0.5% on a monthly basis, beating economists’ expectations.

Surprisingly strong July jobs data, combined with better-than-expected wage gains, will lead the Fed’s next policy meeting in September to a third consecutive 75-basis-point increase (three times normal). may pave the way. Traders are already pricing in a 64% chance of another mega rally in the fall.

Rising interest rates tend to raise interest rates on consumer and business loans, forcing employers to cut spending, which could put additional strain on businesses as the economy slows.

Glenmede’s chief investment officer for private wealth, Jason Pryde, said labor cost growth “was not at all what the Fed had hoped, especially as average hourly wages accelerated to 0.5% month-on-month.” ‘ said. “All else being equal, this should remove any pretext for the Fed to start slowing the pace of tightening, as there are still few concrete signs that inflation will return to normal.”

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Markets fell Friday morning as data dashed hopes for a more dovish Fed in the coming months.