The feds said US companies added 528,000 people to their payrolls in July, restoring the nation’s payrolls to pre-pandemic levels in a surprisingly strong report that shows the Federal Reserve still has work to do as it scrambles to curb record-high inflation.
The blowout figures from the Labor Department on Friday — more than double economists’ expectations for 250,000 jobs to be added — bringing back all the jobs lost during the coronavirus recession. Unemployment fell to 3.5%, a half-century low not seen since the pandemic struck in early 2020.
According to the report, the economy now boasts around 152,536,000 jobs – 32,000 more than the pre-pandemic peak that was recorded in February 2020. Later that spring, 22 million jobs were wiped out over the course of two months, according to US data.
July’s job creation was 130,000 more than those produced in June, and the most since February, the feds said. Wage growth was also stronger than expected in July, with average hourly earnings up 0.5% from June and 5.2% from a year earlier.
The red-hot jobs numbers — which showed widespread strength across both white- and blue-collar sectors, including hospitality, healthcare, manufacturing and finance — arrive amid a growing consensus that the US economy is losing momentum. The economy shrank in the first two quarters of 2022 — a commonly used definition of recession.
Friday’s jobs numbers raise the risk that the Federal Reserve — which last month raised rates by a stiff 0.75 percentage points for the second month straight — will likely be forced to continue hiking aggressively, said Quincy Krosby, chief global strategist for Charlottesville, Virginia-based LPL Financial.
“Today’s report suggests that the Fed will need to do more, not less, to curtail inflation, however the economy’s strength could allow the Fed to continue its more aggressive pace,” Krosby told The Post.
The jobs report won’t definitively clarify whether “the market has reached the so-called bottom of the bear’s clutches” though it will highlight “the strength of the underlying economy, and whether the economy can handle the Fed’s still aggressive campaign to curtail inflation without falling into a recession,” she added.
Robert Reich, the former labor secretary under President Bill Clinton, threw cold water on the jobs report.
“Yes, the US is adding jobs,” Reich tweeted. “But inflation is rising faster than wages, meaning that most workers continue to get pay cuts. Adding jobs alone means nothing if people can’t afford basic living expenses.”
Another sign of trouble could be the spike in the number of people whose hours were cut due to lack of work or business condition, which increased by 303,000 to 3.9 million in July, according to data released Friday. The number remains below its February 2020 level of 4.4 million.
Still, many economic experts chose to focus on the positive.
“Despite the likely market turbulence, this morning’s very strong jobs report is very good news,” Brad McMillan, chief investment officer for Commonwealth Financial Network, told The Post.
“More people working, at higher wages, is a sign of economic strength. And with all of the headlines out there, we can certainly use the good news.”
“The strength of the labor market in the face of 250 basis points of rate tightening from the Fed already this year clearly shows that the Fed has more work to do,” Charlie Ripley, a senior investment strategist for Minneapolis-based Allianz Investment Management, told The Post.
Ripley adds that Friday’s jobs numbers may “force the aggressive hand of the Fed by putting a 75 basis point rate hike back on the table for the September [Federal Open Market Committee] meeting.”