US employers added more than twice as many jobs as forecast, illustrating rock-solid labor demand that is dampening recession fears and suggesting the Federal Reserve will continue with steep rate hikes to thwart inflation.
Farm payrolls rose 528,000 in July, a broad rise that beat all estimates and was the largest in five months, US government data showed. Previous month’s employment was revised up to a gain of 398k. The unemployment rate fell to 3.5 percent, a five-decade low. Wage growth accelerated and the participation rate fell.
The median estimates in a Bloomberg poll of economists called for an increase of 250,000 jobs and an unemployment rate of 3.6 percent.
The report points to an insatiable appetite for labor, particularly in the service sector, which is struggling with labor shortages. Growth in payrolls was broad-based, led by increases in accommodation and food services, healthcare, and professional and business services.
The figures underscore both an advancing labor market and unrelenting inflationary pressures. While the sharp rise in payrolls is welcome news for President Joe Biden, it is also likely to bolster the Fed’s resolve to stay on course for strong rate hikes.
Average hourly wages also surprised on the upside, rising 0.5 percent in July after being revised upwards by 0.4 percent in the previous month. Year-on-year, revenue for a second month increased by 5.2 percent. An accelerated pace of earnings growth suggests that inflationary pressures will persist, worrying Fed policymakers.
“There’s definitely going to be 75 basis points on the table for the next meeting,” said Randall Kroszner, an economics professor at the University of Chicago’s Booth School of Business and a former central bank governor. “The matter is not only the strength of the labor market, but also the significant increase in wages is higher than the expected upward revisions.”
Both wage and unemployment rates have returned to pre-pandemic February 2020 levels.
The labor force participation rate – the percentage of the population that works or looking for work — fell to 62.1 percent, the lowest this year, driven by a sharp decline among teenagers. However, the rate for workers aged 25 to 54 was higher.
https://www.independent.ie/business/world/surprisingly-strong-us-job-growth-eases-recession-fears-for-now-41892435.html The surprisingly strong growth in employment in the USA is alleviating fears of a recession for the time being