Payroll gains more than doubled expectations and the unemployment rate fell to 3.5%, returning to its pre-pandemic level.
(CN) — Shattering expectations as recession fears grow, the US economy added 528,000 jobs in July, while the unemployment rate fell to 3.5%.
Despite other worrying economic indicators pointing to a possible slowdown, the latest jobs report released by the Labor Department on Friday morning shows employers are still hiring at a rapid pace. Economists had predicted only about 258,000 new jobs last month and an unemployment rate of 3.6%.
The unemployment rate of 3.5% in July and the actual number of unemployed – 5.7 million – both returned to their pre-pandemic levels as of February 2020, according to the report.
Wages are still on the rise as well, with average hourly earnings up 0.5% on the month and 5.2% year on year.
“The unexpected acceleration in nonfarm payrolls growth in July, together with the further decline in the unemployment rate and the resumption of wage pressures, suggest that the economy is still far from recession,” said Michael Pearce. , Senior American Economist at Capital Economics.
The better-than-expected labor market numbers contrast with other signs that the United States is heading into a recession. The economy contracted for the second consecutive quarter and the Federal Reserve raised interest rates last month for the fourth time this year in a bid to stifle soaring inflation.
Friday’s strong jobs report could add to inflation concerns and lead to another rate hike when the Fed meets again next month. Pearce said the report raises the odds of another 0.75% increase by the central bank in late September.
“We hear about a recession, but we don’t see any signs of it in labor market data,” said Nick Bunker, research director economist at Indeed Hiring Lab.
Bunker pointed out that the economy has added an average of 437,000 jobs per month over the past three months, which he said shows a tight labor market with strong demand for workers.
“Underestimate the US labor market at your peril,” he wrote. “Yes, output growth could be slowing and the economic outlook has clouds on the horizon. But employers are still chomping at the bit to hire more workers. That demand may be waning, but it’s still hot in this moment.
Leisure and hospitality led the way in hiring last month, adding 96,000 jobs, including 74,000 in food service establishments. The industry has been hardest hit by the Covid-19 pandemic and is still down 1.2 million jobs from February 2020.
Professional and business services came second, adding 89,000 jobs in July. The sector has performed remarkably well during the economic recovery and now has 986,000 more jobs than before the pandemic.
Health care payrolls rose by 70,000, while big gains were also seen in construction (32,000), manufacturing (30,000), social assistance (27,000), retail (22,000) and transportation and warehousing (21,000).
The public sector added 57,000 jobs – 10,000 each at the state and federal levels and 37,000 in local government – but is still down 597,000 from February 2020.
In addition to strong July numbers, May and June job gains were also revised to 386,000 and 398,000, respectively. This latest figure includes 26,000 more jobs than previously thought.
President Joe Biden took a victory lap on Friday morning, saying in a statement that more Americans are working now than at any time in US history.
“That’s millions of families with the dignity and peace of mind that a paycheck provides. And, it is the result of my economic plan to build the economy from the bottom up and in the middle,” he said. “I ran for president to rebuild the middle class – there’s still work to do, but today’s jobs report shows we’re making significant progress for working families.”
Read the Top 8
Sign up for the Top 8, a roundup of the day’s best stories straight to your inbox Monday through Friday.