- Non-farm payrolls increase by 528,000 in July
- Unemployment rate falls to 3.5% from 3.6% in June
- The average hourly wage increases by 0.5%; up 5.2% year-on-year
- The activity rate falls to 62.1% against 62.2% in June
WASHINGTON, Aug 5 (Reuters) – U.S. job growth unexpectedly accelerated in July, lifting the level of employment above its pre-pandemic level and throwing cold water on fears that the economy is in recession.
The Labor Department’s jobs report, closely watched on Friday, also showed that employers continued to raise wages at a healthy pace and generally maintained longer hours for workers. Continued strength in the labor market could give the Federal Reserve the leeway it needs to continue to aggressively raise interest rates.
“If the US economy is in a recession, no one seems to have told employers,” said Sarah House, senior economist at Wells Fargo in Charlotte, North Carolina. “We suspect this data will give the Fed the confidence it needs to aggressively continue its fight against inflation.”
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Non-farm payrolls rose by 528,000 jobs last month, the biggest increase since February, according to the establishment survey. June data has been revised up to show 398,000 jobs created instead of the 372,000 previously reported. July marked the 19th straight month of payroll expansion and shattered economists’ expectations for a gain of just 250,000 jobs.
Reuters survey estimates for the number of jobs gained ranged from a low of 75,000 to a high of 325,000.
The labor market has now recovered all the jobs lost during the COVID-19 pandemic, although public employment remains around 597,000 jobs in the hole. Overall employment is now 32,000 jobs higher than in February 2020.
It took just under 2.5 years to recover all jobs, compared to at least six years after the Great Recession of 2007-2009.
Last week, the Fed raised its key rate by three-quarters of a percentage point and officials have promised more hikes are to come as the US central bank tries to rein in inflation. Annual consumer prices are rising at their fastest pace in four decades. Since March, the Fed has raised its benchmark overnight interest rate from near zero to a range of 2.25% to 2.50%.
“The Fed looks increasingly likely to be able to maintain its current path without constantly looking over its shoulder, making it the envy of global economies that are all undergoing the same balancing act at the peak. knife right now,” said James Bentley, a corporate director at Financial Markets Online.
US gross domestic product declined in the first and second quarters, meeting the standard definition of a recession. The 1.3% contraction in the economy in the first half of the year was mainly due to sharp fluctuations in inventories and the trade deficit linked to tangled 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 distributed throughout the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators.”
But even with July’s robust job gains, some cracks are forming in the labor market. Companies in the interest-rate-sensitive housing, finance, technology and retail sectors are laying off workers. Still, with 10.7 million job openings at the end of June and 1.8 openings for every unemployed person, a sharp deceleration in payroll growth is unlikely this year.
Stocks on Wall Street were trading lower. The dollar appreciated against a basket of currencies. US Treasury prices fell.
Large job gains last month were led by the leisure and hospitality industry, which added 96,000 jobs, mostly in restaurants and bars. But employment in leisure and hospitality remains down 1.2 million from its February 2020 level.
Professional and business services payrolls increased by 89,000, while the health sector added 70,000 jobs. Public employment jumped by 57,000 jobs, boosted by local government education. Construction added 32,000 jobs while the manufacturing payroll rose by 30,000.
Details of the household survey from which the unemployment rate is derived were mixed. While the jobless rate fell to its pre-pandemic low of 3.5% from 3.6% in June, that’s because 63,000 people left the labor force. Membership has now declined for two consecutive months.
The labor force participation rate, or the proportion of working-age Americans who have or are looking for a job, fell slightly to 62.1% from 62.2% in June. This mainly reflects a decline in teenage participation.
The prime-age labor force participation rate rose to 82.4% from 82.3% in June. The employment-to-population ratio of this cohort rebounded to 80%, which corresponds to full employment.
The number of people working part-time for economic reasons rose by 303,000 to 3.9 million after plunging to a more than 20-year low in June.
But household employment rebounded by 179,000 jobs after falling by 315,000 in June, and the number of people experiencing long spells of unemployment fell by 269,000 to 1.1 million, the lowest level since April 2020. These long-term unemployed represented 18.9% of the 5.7 million unemployed. in July.
With the labor market tightening further, average hourly earnings rose 0.5% after rising 0.4% in June. That left the year-over-year wage increase at 5.2%. The workweek remained unchanged at 34.6 hours.
Wage gains were mainly driven by service-sector industries, including leisure and hospitality, financial services, and professional and business services. A proxy for take-home pay jumped 1.2% on a monthly basis, boding well for consumer spending amid falling gasoline prices.
“The risk to wage growth appears to be on the upside in the near term given the continued strength in the labor market and the lack of a rebound in labor supply,” said economist Lydia Boussour. Chief American at Oxford Economics in New York.
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Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao
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