Employers in the United States added 528,000 jobs in July, as the labor market has now recovered all 22 million jobs lost during the pandemic and has defied soaring inflation, rising interest rates, and a slowing economy.
According to the Labor Department, the unemployment rate fell from 3.6 percent to 3.5 percent, matching a 50-year low reached just before the health crisis began in early 2020.
According to a Bloomberg survey, economists estimated that 250,000 jobs were added last month.
“The economy is not in recession,” says Boston College economist Brian Bethune. “It’s actually picking up speed as service demand accelerates in the post-Covid-19 environment.”
The payroll increases in July were widespread. Leisure and hospitality, which includes restaurants and bars and was the hardest hit by COVID-19, led job growth with 96,000. Professional and business services added 89,000 jobs, followed by health care (70,000), construction (32,000), manufacturing (30,000), and retail (22,000).
57,000 new jobs were created by the federal, state, and local governments.
However, the employment recovery conceals divergent narratives for the public and private sectors. While businesses recovered all job losses in June and are now 629,000 jobs above the pre-COVID level, the government is still nearly 600,000 jobs below that level.
This is primarily due to the inability of state and local governments to provide the pay increases, remote work options, and flexible hours offered by the private sector since the pandemic began in spring 2020.
In addition to the strong payroll gains in July, average hourly earnings increased by 15 cents to $32.27, raising the annual increase from 5.1 percent to 5.2 percent and threatening to exacerbate inflationary pressures.
And the proportion of Americans working or looking for work fell from 62.2 percent to 62.1 percent, well below the 63.4 percent pre-COVID level. This proportion had been rising as workers returned to a more favorable labor market after caring for children or remaining idle due to COVID concerns. However, it has broadly declined since reaching a recent peak in March, implying that widespread labor shortages may persist and drive up pay increases.
Overall, the explosive report raises the odds that the Fed will raise its key interest rate by three-quarters of a percentage point for a third straight meeting in mid-September to combat soaring inflation, according to Capital Economics economist Michael Pearce.
In June, inflation reached a 40-year high of 9.1 percent. Higher prices and borrowing costs have slowed spending and fueled recession fears among consumers and businesses.
The labor market, on the other hand, has defied inflation, rising interest rates, and an economy that has contracted for two straight quarters, adding an average of 437,000 jobs per month since May. Because of labor shortages, businesses have been hesitant to let employees go and have continued to add employees to meet the demands of a reopening economy.
Jason Scott intends to hire approximately 25 new employees this year at 120VC, his project management firm, and three at Brick & Matter, his marketing firm. Despite the recession talk, he says clients are still catching up after canceling projects during the pandemic. Furthermore, he claims that the recent wave of layoffs has provided him with a new pool of talented employees.
“I’m going to take a chance,” he says.
There are indications that the job market may soon soften. Initial jobless claims, a measure of layoffs, reached their highest level since November last week, according to a four-week moving average. Oracle, Amazon, Netflix, and Robinhood have all recently announced significant job cuts. In June, job openings were 10.7 million, down from a near-record 11.3 million the previous month.
Furthermore, payroll growth is expected to slow now that the United States has recovered all 22 million jobs lost during the health-care crisis.
Some companies are reducing their hiring plans.
Michael Hobbs, president of PahRoo Appraisal & Consultancy in Chicago, had planned to hire about 20 new employees this year. Instead, he says he’s adding half that amount because higher mortgage rates have slowed home sales and refinancing.
Hobbs’ commercial business is still thriving, and the demand for appraisals is growing, but he is cautious. “If it weren’t for the recession talk, we’d be growing a lot faster,” he says.
