US job growth accelerated in July across almost all industries, restoring employment nationwide to its pre-pandemic level, despite widespread expectations of a slowdown as the Federal Reserve raises rates. interest rates to combat inflation.
Employers added 528,000 jobs on a seasonally adjusted basis, the Labor Department said Friday, more than double what forecasters had projected. The unemployment rate fell to 3.5 percent, matching the February 2020 figure, which was a 50-year low.
Strong job growth is welcome news for the Biden administration in a year when white-hot inflation and recession fears have been recurring economic themes. “Today’s jobs report shows that we are making significant progress for working families,” President Biden said.
The continued strength of the labor market is all the more surprising given that gross domestic product, adjusted for inflation, has declined for two consecutive quarters and consumer confidence in the economy has fallen sharply, along with the president’s approval ratings.
“I’ve never seen a disjuncture between the data and the general environment as big as I have seen,” said Justin Wolfers, an economist at the University of Michigan, noting that job growth is an economic polestar. “It is worth emphasizing that when you try to take the pulse of the economy in general, these data are much more reliable than GDP”
But the report could harden the Federal Reserve’s resolve to cool down the economy. Wage growth accelerated, to 5.2 percent over the past year, indicating labor costs could add fuel to higher prices.
The Fed has raised interest rates four times in its battle to rein in the steepest inflation in four decades, and policymakers have signaled more hikes are on the way. That strategy is likely to lead to a slowdown in hiring later in the year as companies cut payrolls to match expected lower demand.
“At this stage, things are good,” said James Knightley, chief international economist at ING bank. “Let’s say December or the first part of next year, that’s where we could see much softer numbers.”
The nation lost nearly 22 million jobs at the start of the pandemic. The recovery has been much faster than after previous recessions, although employment remains lower than would have been expected had Covid-19 not hit.
July’s gains were the strongest in five months and were spread across nearly every corner of the economy, even as consumers have been shifting their spending away from goods and toward experiences away from home that weren’t available during two years of lockdown restrictions. public health.
The State of Employment in the United States
Job gains in July, which far exceeded expectations, show that the labor market is not slowing despite efforts by the Federal Reserve to cool the economy.
Leisure and hospitality companies led the gains, adding 96,000 jobs, including 74,000 in bars and restaurants. The sector has been the slowest to recoup its losses from the pandemic and remains 7.1 percent below its February 2020 level.
Professional and business services followed closely, adding 89,000 jobs in management occupations, architectural and engineering services, and research and development. That sector, which suffered little during the pandemic, is now almost a million jobs above where it was before the last recession.
Charleen Ferguson has been part of that boom. As the director of sales and marketing for a technology service provider in Dallas, she has struggled for months to hire qualified workers at wages she can afford.
“People we used to pay $22 an hour to start are now asking $35 to $40 an hour,” Ferguson said. “Most of those who apply for a job haven’t even finished school.”
His firms’ clients include accountants, manufacturers and local chambers of commerce, all nervous about the direction of the economy. For now, he’s holding his own, investing in automation software and trying to retain his workers.
“This is not the time to get rid of your employees and not do your regular marketing, no matter what business you’re in,” Ms. Ferguson said.
The only broad industry to lose jobs in July was auto manufacturing, which shed about 2,200 as companies continued to scramble to source parts needed to produce finished vehicles. The public sector added 57,000 employees, notably teachers, but remained 2.6 percent below its pre-pandemic level.
In crucial industries like technology, if some employers initiate layoffs, those workers are likely to be snapped up by companies that would have liked to increase staff but couldn’t find people. And for many types of businesses, if orders slow more broadly, enough will have built up to propel payrolls into the fall.
For example, with mortgage rates rising and new housing starts and permits declining, residential construction jobs would be expected to decline. However, the construction industry added 32,000 jobs in July.
“In industries where we would normally see that initial slowdown — construction, manufacturing, automotive — due to supply chain issues, there is a lag,” said Amy Glaser, senior vice president of business operations at global staffing firm Adecco. “That also helps us navigate right now, because it’s going to take several months to catch up.”
Paradoxically, fear of a recession may be motivating more people to take jobs while they’re still available and stay in them rather than leave. The number of people unemployed for 27 weeks or more fell to 1.1 million in July, while the share of people who quit their jobs was flat or down from February. Small businesses have reported that while hiring remains a top concern, the availability of workers has improved slightly in recent months.
“Workers across the board have had the luxury of choice over the last year in terms of deciding which of the multiple offerings to pick,” said Simona Mocuta, chief economist at State Street Global Advisors. “If the consumer opinion polls are correct and the feeling is that things are starting to change, maybe there is an incentive for you to make your decision and be done with it.”
However, in a substantial asterisk to the report’s overall strength, high demand has done little to expand the ranks of available workers by pushing people off the fringes of the labor market.
The overall labor force participation rate fell slightly to 62.1 percent, 1.3 percentage points below its level in February 2020. Policymakers have watched that figure closely, because more workers available could contain labor costs and help alleviate inflation.
Seniors 55 and older in particular haven’t gone job hunting in large numbers, even as bank accounts that grew during the pandemic dried up and the stock market crash took a chunk out of 401(k) accounts, which raised fears of inadequate retirement savings. .
Part of that, the evidence suggests, could be due to the rising prevalence of debilitating prolonged covid. John Leer, chief economist at polling and analysis firm Morning Consult, said polls showed concerns about infections persisted, but also that there was simply not enough awareness of the opportunities available.
“I think it’s a reflection of information asymmetries,” Leer said. “We know there are a lot of offerings out there, but if you’re sitting on the sidelines, it’s very hard to know that his skills, maybe in a restaurant, could morph pretty quickly and move into transportation or warehousing.”
Jessica Buckley, who lives in Maine, has been one of those contemplating a new career but not quite daring, even though the state’s job offer rate is above the national average.
She worked in agricultural marketing until about a decade ago, when she decided to stay home with her children. When she started looking for work again, she found nothing comparable available in the region, and she has been reluctant to change fields as long as the family can survive on her husband’s income.
Yet she is increasingly open to becoming a paralegal, or even working in restaurants, where wages have risen 18.6 percent, unadjusted for inflation, since the start of the pandemic.
“I would also start working as a waitress, or even go back to being a waitress, because there is something appealing about just showing up, doing something and walking away,” said Ms. Buckley, 52. “Everything is on the table.”
ben casselman contributed report.