US hiring continues, employers add 528,000 jobs in July

Defying fears of a potential recession and raging inflation, US employers added a staggering 528,000 jobs last month, restoring all the jobs lost in the coronavirus-induced recession. Unemployment fell to 3.5%, the lowest rate since the pandemic struck in early 2020.

In July, 130,000 more jobs were created than in June, and the most since February.

Friday’s red-hot jobs data from the Labor Department comes in amid a growing consensus that the US economy is losing momentum. The economy shrank in the first two quarters of 2022 – an informal definition of recession. But most economists believe that the strong job market has kept the economy from going into a downturn.

The surprisingly strong job numbers will no doubt intensify the debate about whether the US is in recession or not.

‘Recession – what recession?” Brian Coulton, 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 normally see in a good year. ”

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

There are, of course, political implications in the numbers: Rising prices and the risk of a recession are likely to weigh on voters in November’s midterm elections as President Biden’s Democrats try to maintain control of Congress.

Biden took credit for the resilient labor market on Friday, saying it was “the result of my economic plan”.

The president boosted job growth last year through his $1.9 trillion coronavirus relief package and $1 billion bipartisan infrastructure bill. However, Republican lawmakers and some leading economists point to government spending as the reason for current inflation rates, the likes of which have not been seen in 40 years.

And for millions of Americans, it’s the diminishing power of paychecks amid rising inflation that remains at the forefront.

Hourly wages posted a healthy 0.5% gain last month and are up 5.2% over the past year. That’s not enough to keep up with inflation, meaning many Americans, especially the poorest, are having to cut back because of the high prices of groceries, gasoline, and even school supplies.

“There is more work to be done, but today’s jobs report shows that we are making significant progress for working families,” Biden said Friday.

The Ministry of Labor also reviewed May and June hirings and said 28,000 additional jobs were created in those months. Job growth was particularly strong last month in the healthcare sector and at hotels and restaurants.

The number of unemployed fell as the number of Americans who claimed to have a job rose by 179,000 and the number who claimed to be unemployed fell by 242,000. But 61,000 Americans left the workforce in July, reducing the proportion of those in employment or seeking work to 62.1% last month, from 62.2% in June.

Strong jobs data is likely to encourage the Federal Reserve to continue raising interest rates to cool the economy and curb resurgent inflation. “The strength of the labor market in light of … the Fed’s rate tightening already this year clearly shows that the Fed has more work to do,” said Charlie Ripley, senior investment strategist at Allianz Investment Management. “Overall, today’s report should put the idea of ​​a near-term recession on the back burner.”

However, the economic background is alarming. Gross domestic product — the broadest measure of economic output — declined in both the first and second quarters; successive declines define a recession.

The resilience of the current labor market, especially low unemployment, is the main reason most economists do not believe another downturn has begun, although they increasingly fear one is imminent.

New Yorker Karen Smalls, 46, started looking for work three weeks ago, through job boards such as ZipRecruiter and Indeed, as a support staff for social workers who help people with mental health problems.

“I didn’t realize how good the job market is right now,” she said shortly after completing her fifth job interview this week. “You look at the news and see all those bad news… but the job market is great right now.” A single mother, she weighs several offers in search of one that is close to her Manhattan home and pays enough to allow her to care for her two children.

Recession is not just an American problem.

In Britain, the Bank of England predicted on Thursday that the world’s fifth largest economy would plunge into recession by the end of the year.

The Russian war in Ukraine has obscured prospects across Europe. The conflict has made energy supplies scarce and prices have risen. European countries are bracing for the possibility that Moscow will continue to reduce — and perhaps cut off — natural gas flows, which are used to power factories, generate electricity and keep homes warm in winter.

If Europeans can’t store enough gas for the cold months, the industry may demand rationing.

The economies have been on a wild ride since COVID-19 struck in early 2020.

The pandemic nearly brought economic life to a standstill as businesses closed and consumers stayed at home. In March and April 2020, US employers cut as many as 22 million jobs and plunged the economy into a deep two-month recession.

But massive government support — and the Federal Reserve’s decision to cut interest rates and pump money into financial markets — fueled a surprisingly quick recovery. Overwhelmed by the strength of the upswing, factories, shops, ports and freight yards were inundated with orders and scrambled to bring back the workers they had laid off when COVID struck.

The result is shortages of workers and supplies, delayed shipments and rising prices. Inflation in the US has been rising steadily for more than a year. In June, consumer prices rose 9.1% year-on-year, the largest increase since 1981.

The Federal Reserve underestimated the rebound in inflation and thought prices were rising because of temporary supply chain bottlenecks. It has since acknowledged that the current wave of inflation is not, as it was once called, “transient.”

Now the central bank is reacting aggressively. It has raised its short-term benchmark four times this year and more rate hikes are in the pipeline.

Higher borrowing costs take their toll. Rising mortgage rates, for example, have cooled a red-hot housing market. Sales of previously occupied homes fell for the fifth month in a row in June.

Real estate companies — including lender LoanDepot and online home broker Redfin — have started firing employees.

Before Friday’s blockbuster recruiting report, the job market showed other signs of shakyness.

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 average four-week number of Americans filing for unemployment benefits, an indicator of layoffs that smooths out week-to-week swings, rose last week to its highest level since November, although the numbers may have been exaggerated due to seasonal factors.

“Underestimating the U.S. job market at its peril,” said Nick Bunker, chief of economic research at the Indeed Hiring Lab. “Yes, manufacturing growth may be slowing and the economic outlook may be on the horizon. But employers are still too eager to hire more workers. That demand may decrease, but it’s still red hot.”

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