Jobs in July far beat expectations, ignoring multiple other signs that the economic recovery is losing momentum, the Bureau of Labor Statistics reported Friday.
Nonfarm payrolls increased by 528,000 over the month and the unemployment rate was 3.5%, easily above Dow Jones estimates of 258,000 and 3.6% respectively. The unemployment rate for blacks rose 0.2 percentage points to 6% for him, but now unemployment is back to pre-pandemic levels, the lowest since 1969.
Wage growth also surged, with average hourly earnings up 0.5% month-on-month and 5.2% year-on-year. These figures add to the inflationary backdrop, with consumer prices rising at their fastest pace since the early 1980s. Dow Jones estimates were for a 0.3% monthly increase and a 4.9% yearly increase.
More broadly, however, the report shows that the labor market remains strong despite other signs of economic weakness.
“There’s no way to look at this the other way around,” said Liz Ann Saunders, chief investment strategist at Charles Schwab. ‘There aren’t many opinions like that.’ “For the economy, this is good news.”
The market initially reacted negatively to the report. The Dow Jones Industrial Average fell 128 points early in the trade as traders expected a strong response from the Federal Reserve to cool the economy, especially the overheated labor market.
Leisure and hospitality led the addition of 96,000 jobs, but the industry still has 1.2 million workers below pre-pandemic levels.
Professional and business services were next with 89,000. Health care added 70,000 and government salaries increased by 57,000. Goods manufacturing also showed strong growth, with construction increasing by 32,000 and manufacturing by 30,000.
Retail employment increased by 22,000 despite repeated warnings from executives such as Walmart and Target that consumer demand was shifting.
A more inclusive view of unemployment, which includes people with part-time jobs for economic reasons and discouraged workers who are not looking for work, remained unchanged at 6.7%.
Despite low expectations, July’s increase was the highest since February and well above the average employment increase of 388,000 over the past four months. According to a BLS release, total nonfarm payrolls increased by 22 million from the lowest level in April 2020, when much of the US economy was shut down to cope. covid pandemic.
The previous month’s totals were slightly revised, increasing from 2,000 to 386,000 for May and from 26,000 to 398,000 for June.
“While the report is a letdown on a significant drop in labor demand, it bodes well for the broader U.S. economy and workers,” Bank of America economist Michael Gappen said in a memo to clients. Stated.
The bureau noted that while private sector employment numbers are now above levels in February 2020, just before the pandemic was declared, government work is still lagging behind.
The unemployment rate fell as a result of strong job creation and the labor force participation rate fell 0.1 percentage point to 62.1%, the lowest level of the year.
Economists believe job creation will begin to slow as the Federal Reserve raises interest rates to curb inflation, which is at its highest level in more than 40 years.
A combination of strong employment numbers and higher-than-expected wage numbers led to a shift in expectations for the expected rate hike in September. Traders now highly rate him for a 0.75% rate hike at the next meeting.
“It will strengthen the Fed’s confidence that it can tighten monetary policy without leading to a significant rise in unemployment,” said Daniel Zhao, chief economist at job site Glassdoor. “But it also shows that the labor market hasn’t cooled down, or at least it hasn’t cooled as quickly as expected…at least, it’s a surprise, but the Fed is still on track to continue. I think we will tighten monetary policy.”
The Fed has raised the base rate four times this year, totaling 2.25 percentage points. This pushed the federal funds rate to its highest level since December 2018.
Meanwhile, the economy has cooled significantly.
Gross domestic product, a measure of all goods and services produced, has declined in the first two quarters of 2022, meeting the common definition of a recession. White House and Fed officials, as well as most Wall Street economists, say the economy is likely not in an official recession, but the slowdown is clear.
“The recession debate at this point is more academic than anything else,” said Schwab strategist Sonders. “There is no denying that growth is weakening. is the point of
The Federal Reserve’s interest rate hikes are aimed at slowing the economy, resulting in a labor market where job openings still outnumber available workers by nearly 2 to 1. Bank of America said this week that its own indicators of labor market momentum show it is still strong but slowing, largely due to central bank policy tightening.
The main reason for the contraction is much stronger and persistent inflation than most policymakers expected. Prices in July were the highest since November 1981, up 9.1% from a year earlier.
Jobs Report July 2022: 528,000
Source link Jobs Report July 2022: 528,000