Despite high inflation, tighter monetary policy, and limited fiscal support, the US economy unexpectedly added 528,000 jobs in July, and the unemployment rate dropped to a half-century low, allaying fears of a recession.
The figures revealed an acceleration in the rate of job creation compared to June, when the economy generated 398,000 jobs, more than double the 250,000 jobs economists had anticipated.
The jobless rate decreased slightly from 3.6 percent to 3.5 percent, reaching the 50-year low it last reached right before the Covid-19 pandemic in 2020.
A dip in the world’s largest economy just months before the midterm elections that will determine control of Congress will be allayed by the numbers revealed on Friday, which show that the US labor market has recovered every job lost since the outbreak began in February 2020. They might also give the Federal Reserve more confidence to keep swiftly tightening monetary policy to contain rising prices.
Despite polls showing that most Americans disapprove of his management of the economy, President Joe Biden praised the findings in a statement as proof that his economic policies were effective.
“More people are working now than at any time in American history.
And, it’s the outcome of my economic plan to build the economy from the center out and the bottom up,” he remarked.
According to figures on a gross domestic product released last week, the US’s output fell for the second quarter, raising concerns about the economy’s health. The National Bureau of Economic Research, which determines what constitutes a recession in the US, has not declared that one is underway, but any significant decline in job growth might worsen these worries.
Senior Biden administration officials have brushed aside concerns that the US is in a recession, saying the economy is still in good shape and is simply transitioning to a slower pace following the boom it enjoyed last year.
Fed Chair Jay Powell has advised against reading too much into the GDP data and stated that he still believes interest rates may climb further without causing a nasty recession. However, he has cautioned that the way to that result is becoming “narrower.”
Separate statistics from the US Labor Department released on Thursday indicated that 260,000 people had applied for unemployment benefits in the previous week, which is the biggest amount in more than six months and raises concerns about the direction of the labor market.
Jobs are becoming available
Ian Charles, a product manager, lost his job a few weeks ago when his financial technology company announced a round of layoffs, citing a change in investor mood that was making it more difficult for start-ups to secure capital.
The 33-year-old was shocked and terrified at first, remembering how challenging his job search had been a few years before. But this time, he declared, “it’s an entirely different ballgame.”
According to analysts, the Federal Reserve will probably continue to rapidly boost interest rates as a result of the strong hiring.
In response to consumer prices rising at their quickest rate since 1981, the bank has already announced rate increases four times since March. In June, the inflation rate increased once more, reaching 9.1 percent.
Although not as quickly, wages are also increasing. According to the study released on Friday, the average hourly salary increased by 5.2% from July 2021.
The jobs data was “uncomfortably hot,” according to economist Jason Furman, who served as an advisor to former president Barack Obama and currently teaches at Harvard.
On Twitter, he said: “Nice to see this many jobs added, but it is worrying about what it indicates for the size of the adjustment we may have coming.” “Recession is no longer a major concern. More of an issue is inflation. The Fed will probably need to take additional action.”