July hirings were much better than expected, defying signs that the economic recovery is losing momentum, the Bureau of Labor Statistics reported Friday.
Nonfarm payrolls rose 528,000 this month and the unemployment rate stood at 3.5%, well ahead of Dow Jones estimates of 258,000 and 3.6%, respectively.
Wage growth also rose higher, as average hourly wages rose 0.5% for the month and 5.2% from the same time a year ago. Those numbers add fuel to an inflation picture that is already seeing consumer prices rise at the fastest pace since the early 1980s. The Dow Jones estimate was for a monthly gain of 0.3% and an annual increase of 4.9%.
Markets initially reacted negatively to the report, with Dow Jones futures falling more than 200 points.
Leisure and hospitality led the way in job growth at 96,000, followed by professional and business services at 89,000. Healthcare added 70,000 and government salaries grew by 57,000. Goods-producing industries also posted solid gains, with construction up 32,000 and manufacturing up 30,000.
Despite gloomy expectations, July’s increases were the best since February and well above the 388,000 average job growth over the past four months. The BLS release noted that total employment outside the agricultural sector has increased by 22 million since the April 2020 low, when most of the US economy was shut down to deal with the Covid pandemic.
The agency noted that private sector payrolls are now above February 2020 levels just before the pandemic statement, although government jobs are still lagging.
The unemployment rate fell, the result of both strong job creation and an employment rate that fell 0.1 percentage point to 62.1%, the lowest level of the year.
Economists expect job creation to begin to slow as the Federal Reserve raises interest rates to cool inflation from its highest level in more than 40 years.
Strong job numbers, coupled with higher-than-expected wage figures, shifted expectations for the expected rate hike in September. Traders now estimate a greater chance of a 0.75 percentage point gain before the next meeting, which would be the third consecutive rise of that size.
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