US employers added 528,000 jobs in July, the Labor Department said on Friday, a strong unexpected gain that shows the labor market is weathering the economic impact of higher interest rates, at least so far.
The impressive performance, which returns total employment to its February 2020 level, just before the pandemic shutdowns, provides new evidence that the United States has not entered a recession.
The gloomy readings on consumer confidence in recent months, coupled with fears that a recession was looming or had even started, were “completely at odds with the reality of what the underlying data was telling us,” said Justin Wolfers, economist from the University of Michigan. “I have never seen a disjunction between the data and the general environment as large as the one I saw.”
But with the Federal Reserve pursuing an aggressive policy of interest rate hikes to control inflation, most forecasters expect the labor market momentum to slow markedly later in the year as companies cut payrolls to meet the lower demand.
“At this stage, things are good,” said James Knightley, chief international economist at ING bank. “Let’s say December or the first part of next year, that’s where we could see much softer numbers.”
The jobless rate was 3.5 percent, down from 3.6 percent in June, matching its 50-year low on the eve of the pandemic.
Last week, the government reported that the nation’s gross domestic product, the broadest measure of economic output, had contracted for the second consecutive quarter when adjusted for inflation. The data showed a sharp drop in home construction, a decline in business investment and a slow rise in consumer spending.
Those trends are bound to affect the overall job market, though not uniformly or immediately.
Amy Glaser, senior vice president at global staffing agency Adecco, said her company was still struggling to fill hourly jobs, especially in retail and logistics. Employers may not have made those positions attractive enough and, increasingly, may do without them.
“By the time someone applies and a recruiter reaches out, they have about 24 hours to place them in a position or they’ll be gone,” Glaser said. “The candidates are in the driver’s seat.”