US job growth picks up in July as labor market defies recession fears

A pedestrian passes the “Help Wanted” sign at the door of a hardware store in Cambridge, Massachusetts, US, July 8, 2022. REUTERS/Brian Snyder/

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  • Nonfarm payrolls increased 528,000 in July
  • The unemployment rate fell to 3.5% from 3.6% in June
  • Average hourly earnings are up 0.5%; 5.2% increase year over year
  • Participation rate fell to 62.1% from 62.2% in June

WASHINGTON (Reuters) – U.S. job growth unexpectedly accelerated in July, raising employment to its pre-pandemic level, the strongest evidence yet that the economy was not in a recession.

The closely watched Labor Department employment report on Friday also showed that employers continue to raise wages at a solid rate and maintain longer working hours for workers. Continued labor market strength could put pressure on the Federal Reserve to keep interest rates high.

“The combination of strong job growth, a very tight labor market and high wage inflation suggests that the pace of rate hikes by the Fed will likely remain elevated next month,” said Michael Gregory, deputy chief economist at BMO Capital Markets in Toronto. “.

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The Institutional Survey showed non-farm payrolls increased by 528,000 last month, the largest increase since February. The data for June was revised higher to show 398,000 jobs created instead of the 372,000 previously reported. July marked the 19th consecutive month of payroll expansion.

Economists polled by Reuters had expected salaries to increase by 250,000 jobs and the unemployment rate to remain steady at 3.6%. Estimates of the number of jobs gained ranged from 75,000 to 325,000.

The labor market has now regained all the jobs it lost during the COVID-19 pandemic, although government hiring remains around 597,000 jobs in the hole.

Last week, the Federal Reserve raised the interest rate by three-quarters of a percentage point. The US central bank has raised this rate by 225 basis points since March.

The economy contracted 1.3% in the first half of the year, largely due to large swings in inventories and trade deficits linked to faltering 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 spread throughout the economy, lasting for more than a few months, and typically visible in production, employment, real income, and other indicators.”

With 10.7 million jobs at the end of June and 1.8 for every unemployed person, the labor market remains tight and economists don’t expect a sharp slowdown in job growth this year.

US stocks opened lower. The dollar rose against a basket of currencies. US Treasury bond prices fell.

Extensive gain

The broad gains in jobs were led by the leisure and hospitality sector last month, as it added 96,000 positions, mostly in restaurants and bars. But leisure and hospitality employment is still 1.2 million lower than its level in February 2020.

Professional and business services payrolls increased by 89,000 jobs, while health care added 70,000 jobs. Government employment jumped by 57,000 jobs. Construction added 32,000 jobs while manufacturing payrolls increased by 30,000.

Details of the household survey from which the unemployment rate was derived were mixed. While the unemployment rate fell to its pre-pandemic low of 3.5% from 3.6% in June, that was due to 63,000 people leaving the workforce.

The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for a job, fell to 62.1% from 62.2% in June. The number of people working part-time for economic reasons rose by 303,000 after dropping to more than 20 years in June.

But domestic employment rebounded by 179,000 jobs after dropping by 315,000 jobs in June, and the number of people with long periods of unemployment fell sharply.

Average hourly earnings increased 0.5% last month after rising 0.4% in June. This resulted in a year-over-year wage increase of 5.2%. Although wage growth has peaked, pressures remain. Data last week showed that annual wage growth in the second quarter was the fastest since 2001. READ MORE

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(Reporting by Lucia Mutikani) Editing by Chizu Nomiyama and Paul Simao

Our Standards: Thomson Reuters Trust Principles.

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