If you’ve been worried about a recession and the job market turning south, the blistering pace of hiring in July ought to put those fears to rest—at least for now.
- The economy added 528,000 jobs in July, more than twice as many as economists had anticipated.
- The number of people working surpassed pre-pandemic levels for the first time to reach an all-time high.
- The unemployment rate sank to 3.5%, last seen in February 2020 and tying with the 50-year low .
- The hiring surge put to rest fears that the economy is in a recession, but raised the chances the Federal Reserve will hike interest rates steeply, raising borrowing costs and slowing the economy more.
The economy added 528,000 jobs in July, the Bureau of Labor Statistics said Friday. That more than doubled the expectations of economists, whose median prediction was for just 258,000. It was the most hiring in any month since February, and now brings the number of people working to its highest level ever, surpassing February 2020 for the first time since the pandemic hit and recovering the last of the 22 million jobs lost when the pandemic hit. The unemployment rate dropped from 3.6% to 3.5%, also returning to pre-pandemic levels for the first time—a rate that hasn’t been lower since 1969.
The report showed that despite the efforts of the Federal Reserve in recent months to cool rampant inflation by hiking its benchmark interest rate to slow down the economy, workers remain in high demand. Hiring has blazed ahead even though the number of job openings has slipped slightly and the number of unemployment claims has crept upwards in recent months. The job market remains a bright spot in an economy whose overall output has shrunk for two quarters running—an indication that signals a recession to some economists, but one that looks premature going by the jobs report.
“If you thought the economy was in a recession, you were wrong,” said John Leer, chief economist at the Morning Consult, in a commentary. “Demand for workers skyrocketed in July, far exceeding expectations.”
Nearly every major sector of the economy added jobs, with the biggest contributor being healthcare and social services, which added 96,000 positions. Out of the major categories, motor vehicles and parts was the only one that went in reverse, losing 2,200.
It wasn’t all good news though. The labor force participation rate—that is, the percentage of the population working or looking for a job—declined for a second month to 62.1%, its lowest in 2022 and well below the pre-pandemic rate of 63.4%.
One possible explanation for the lower number of job seekers: average hourly wages have increased 5.2% over the last 12 months, as employers have competed for workers, but that’s not enough to cover increases in consumer prices, which have gone up 9.1% over the same period. The fact that wages aren’t keeping up with inflation could be discouraging many people from looking for a job, Jason Furman, a Harvard economist and former top economic advisor to Barack Obama, speculated on Twitter.
Another potential downside of the report: the roaring labor market will likely encourage the Federal Reserve to raise interest rates steeply, increasing the costs of consumer loans and further dragging on economic growth, economists said.
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