5 key takeaways from the jobs report
NEW YORK — July’s jobs report was a stunner, in more ways than one. Despite raging inflation and anxiety about a possible recession, employers created 528,000 jobs last month, more than double market expectations. That’s the fastest pace of hiring since February.
No signs of slowing
Economists and policymakers had expected hiring to slow in July due to recession worries, rising interest rates and high inflation, with forecasts of 250,000 jobs created versus 372,000 in June.
Not only did job creation blow past those expectations, but the pace of hiring was back to levels not seen since the beginwould ning of the year. Unemployment is at a 50-year low, and wages grew by 0.5 percent last month. Further, the Labor Department revised its May and June reports to show stronger hiring in those months.
Leaning on brakes
With July’s strong jobs report, the market now expects the Fed to apply more pressure on the economy in its effort to cool inflation.
Fed fund futures, which are securities that bet on which way the Fed will move interest rates, now show there’s a 70 percent chance the central bank will raise interest rates by 0.75 percentage points at its September meeting. Before the jobs report came out, that figure was 34 percent.
“This remains one of the strongest job markets in the past 50 years, no comfort for those hoping for a slowdown which reduce inflation and lead to a less aggressive path of rate hikes from the Federal Reserve,” said Mike Fratantoni, chief economist with the Mortgage Bankers Association, in an email.
Spending down
Without this blockbuster jobs report, most signs would point to the U.S. economy being in a recession or heading into one.
Last week the Commerce Department reported that the U.S. economy contracted for a second consecutive quarter, meeting the informal definition of a recession. The report showed Americans bought fewer goods, while business investment fell. Inventories tumbled as businesses slowed their restocking of their shelves.
Pre-pandemic levels
For the labor market, it’s February 2020.
Overall, the number of employed Americans is now above pre-pandemic levels, according to the Labor Department. But the degree of the economic recovery varies dramatically by sector or industry. There are now nearly 1 million more jobs in the professional and business services sector and roughly 41,000 more jobs in manufacturing than there were before the pandemic hit.
The recovery in manufacturing is notable, since manufacturing jobs have been a big push for Democrats and the White House. Congress recently passed a law to promote domestic semiconductor manufacturing, and the spending package backed by Democrats would have additional funds for construction and energy projects.
President Joe Biden took credit for the resilient labor market Friday, saying “it’s the result of my economic plan.”
Pumping up wages
While the jobs report showed widespread gains, it is the fading power of the paycheck that remains front and center for millions of Americans.
Hourly earnings posted a healthy 0.5 percent gain last month and are up 5.2 percent over the past year. That still is not enough to keep up with inflation, which means many Americans, especially the poorest, are having to scrimp in the face of high prices for groceries, gasoline and basic needs.