U.S. Economy Adds 528,000 Jobs in July, Doubling Expectations
The Bureau of Labor Statistics has released the jobs report for July, and while economists were predicting a cooling job market in the wake of interest rate hikes and recession fears, the job market greatly exceeded expectations.
The unemployment rate also ticked down a notch, from 3.6 percent to 3.5 percent. Wages are also up just over 5 percent from a year ago.
The biggest news from the report is that the job market has eclipsed where it was in February 2020, just before the COVID-19 pandemic shut the economy down across the country and led to an economic crisis.
Despite other signs of economic weakness, including the news that the economy shrank in the second quarter and signaled a likely recession, the jobs report is a sign that at least one aspect of the economy is going strong.
“There’s no way to take the other side of this. There’s not a lot of, ‘Yeah, but,’ other than it’s not positive from a market or Fed perspective,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “For the economy, this is good news.”
Markets initially reacted negatively to the report, with Dow Jones Industrial Average futures down more than 200 points as traders anticipated a strong counter move from a Federal Reserve looking to cool the economy and in particular a heated labor market.
Leisure and hospitality led the way in job gains with 96,000, followed by professional and business services with 89,000. Health care added 70,000 and government payrolls grew 57,000. Goods-producing industries also posted solid gains, with construction up 32,000 and manufacturing adding 30,000.
This week has been a whirlwind of economic news. It was reported earlier this week that jobless claims for the week of July 30 were up from the previous week. And with the end of the second quarter, many companies like Walmart and others are signaling they are freezing hiring ahead of a potential recession.
The Biden administration has maintained that the U.S. is not in a recession despite two quarters of negative GDP growth. They have often pointed to the job market as a sign that the U.S. is not in recession right now.
The hot jobs report has surprised analysts.
Investors are now predicting that the Federal Reserve will raise interest rates by 0.75 points again in September in another major attempt to combat inflation, which is still at a 40 year high.