U.S. employers added a booming 528,000 jobs in July as the labor market now has recovered all 22 million jobs lost in the pandemic and continued to defy soaring inflation, rising interest rates and a slowing economy.
The unemployment rate fell from 3.6% to 3.5%, matching a 50-year low, the Labor Department said Friday.
Economists had estimated that 250,000 jobs were added last month, according to a Bloomberg survey.
Inflation hit a 40-year high of 9.1% in June, keeping the Federal Reserve on course to aggressively raise interest rates. The higher prices and borrowing costs have led consumers and businesses to slow spending and stoked recession fears.
Friday’s blockbuster report increases the odds that the Fed will hike its key rate by three-quarters of a percentage for a third straight meeting in mid-September. Besides the robust payroll gains, average hourly earnings rose 15 cents to $32.27, pushing the annual gain from 5.1% to 5.2% and threatening to intensify inflation pressures.
And the share of Americans working or looking for jobs fell from 62.2% to 62.1%, well below the pre-COVID level of 63.4%. That share had been rising as workers returned to a favorable labor market after caring for children or staying idle because of COVID fears. But it has broadly edged down after hitting a recent peak in March, suggesting that widespread labor shortages could persist and push pay increases higher.
The labor market remarkably has shrugged off the inflation spike, rising interest rates and an economy that has contracted for two straight quarters, adding an average of 443,000 jobs the past three months. Because of the labor shortages, companies have been hesitant to let workers go and continued to add staffers to meet the demands of a reopening economy.
Jason Scott, however, still plans to bring on about 25 new employees this year at 120VC, his company that manages projects for businesses, and three at Brick & Matter, his marketing firm. Despite the recession chatter, clients are still catching up after scrapping projects during the pandemic, he says. Plus, he says, the recent flurry of layoffs have provided him a fresh pool of talented employees.
“I’m going to roll the dice,” he says.
Last week, however, initial jobless claims, a gauge of layoffs, rose to the highest level since November based on a four-week moving average. Tech giants such as Oracle, Amazon, Netflix and Robinhood have all announced significant job cuts recently.
Also, hiring has been expected to downshift now as the U.S. drew closer to recouping all 22 million jobs lost in the health crisis.
Some employers are dialing back their hiring plans.
Michael Hobbs, president of Chicago-based PahRoo Appraisal & Consultancy, had planned to add about 20 employees this year. Instead, he says he’s adding half that number because higher mortgage rates have triggered a sharp slowdown in home sales and refinancing.
Hobbs’ commercial business is still healthy and the need for appraisals is increasing, but he’s wary. “We would be growing a lot faster if not for the recession talk,” he says.