US job growth picks up in July as the labor market defies recession fears

A pedestrian passes a “Help Wanted” sign in the door of a hardware store in Cambridge, Massachusetts, US, July 8, 2022. REUTERS/Brian Snyder/

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  • Nonfarm payrolls up 528,000 in July
  • Unemployment rate drops from 3.6% in June to 3.5%
  • Average hourly wage increases 0.5%; an increase of 5.2% year-on-year
  • Participation rate drops from 62.2% in June to 62.1%

WASHINGTON, Aug. 5 (Reuters) – US job growth unexpectedly accelerated in July, bringing employment back to pre-pandemic levels, the strongest evidence that the economy was not in recession to date.

The Labor Department’s closely watched employment report on Friday also found that employers continued to increase wages at a strong clip and increase hours for employees. The continued strength of the labor market could put pressure on the Federal Reserve to continue its aggressive rate hikes.

“The combination of strong job growth, an extremely tight labor market and persistently high wage inflation suggests that the Fed’s rate hike frequency is likely to remain robust next month,” said Michael Gregory, deputy chief economist at BMO Capital Markets in Toronto.

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Nonfarm payrolls rose by 528,000 jobs last month, the largest increase since February, the survey of establishments found. The data for June was revised higher to show 398,000 jobs instead of the previously reported 372,000. July marked the 19th straight month of pay increases.

Economists consulted by Reuters had forecast payrolls would rise by 250,000 jobs and the unemployment rate would remain stable at 3.6%. Estimates for the number of jobs won ranged from a low of 75,000 to a high of 325,000.

The job market has now made up for all of the jobs lost during the COVID-19 pandemic, although government employment is keeping an eye out for around 597,000 jobs.

The Federal Reserve raised its key rate by three-quarters of a percentage point last week. The US central bank has raised interest rates by 225 basis points since March.

The economy shrank by 1.3% in the first half of the year, largely due to wide swings in inventories and the trade deficit associated with stalled global supply chains.

The National Bureau of Economic Research, the official arbiter of recessions in the United States, defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally apparent in manufacturing, employment, real income, and other indicators.”

With 10.7 million vacancies at the end of June and 1.8 for every unemployed person, the labor market remains tight and economists do not expect a sharp slowdown in wage growth this year.

US stocks opened lower. The dollar rose against a basket of currencies. US Treasury bond prices fell.

WIDE PROFIT

Last month’s ample job growth was led by the leisure and hospitality sector, which added 96,000 new jobs, most in restaurants and bars. But employment in the leisure and hospitality industry remains 1.2 million lower than in February 2020.

Professional and business services payrolls increased by 89,000, while healthcare added 70,000 jobs. Government employment increased by 57,000 jobs. Construction added 32,000 jobs, while manufacturing wages increased by 30,000.

Details of the household survey from which the unemployment rate is derived were mixed. While the unemployment rate fell to its pre-pandemic low of 3.5%, compared to 3.6% in June, it was because 63,000 people left the workforce.

The employment rate, or the proportion of working-age Americans who have or are looking for a job, fell from 62.2% to 62.1% in June. The number of people working part-time for economic reasons has risen by 303,000, after falling to a more than 20-year low in June.

But household employment recovered 179,000 jobs after dropping from 315,000 in June, and the number of people in long-term unemployment fell sharply.

Average hourly wages rose 0.5% last month, after rising 0.4% in June. That kept the year-on-year increase in wages at 5.2%. While wage growth appears to have peaked, the pressure remains. Data from last week showed second-quarter annual wage growth was the fastest since 2001. read more

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Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao

Our Standards: The Thomson Reuters Trust Principles.

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