According to the Labor Department, firms in the United States added 528,000 new positions in July. That is considerably above the 250,000 new employment that economists had predicted would be added throughout the period. Additionally, it represented an increase over the previous month, when firms created 372,000 jobs despite the biggest inflation in forty years.
The unemployment rate decreased slightly from 3.6 percent in June to 3.5 percent, which is the lowest level seen since February 2020, right before the COVID-19 pandemic broke out in the United States. Prior to the most recent payrolls report, the economy was creating 450,000 jobs per month on average.
The unemployment rate and total nonfarm employment have both reached pre-pandemic levels.
The employment figures highlight the economy’s resiliency after two consecutive quarters of decreasing GDP, which is regarded as a sign of a recession. Despite this slowing economic development, firms are nevertheless adding employment and keeping their current employees because of the high level of consumer demand.
“This is a job market that just won’t quit. It’s challenging the rules of economics,” said Becky Frankiewicz, chief commercial officer of hiring company ManpowerGroup in an email after the data was released. “The economic indicators are signaling caution, yet American employers are signaling confidence.”
Why stocks may fall
Stocks are likely to suffer in the short term as a result of last month’s robust employment growth, which shows the Federal Reserve can keep aggressively raising interest rates to control inflation. Prior to the market opening on Friday, S&P 500 futures were down 0.7 percent, according to FactSet.
Rates have been raised by the central bank in an effort to control inflation, which is at its highest levels in four decades. Borrowing money is getting more expensive for both individuals and businesses as a result of the Fed’s four rate increases so far this year. The statistics for July show that employers are continuing to hire new employees, contrary to what economists had anticipated would happen.
According to Wall Street analyst Adam Crisafulli of Vital Knowledge in a client note, the July payroll data “reflects an economy operating at a very healthy level, one that’s certainly not in recession and that can withstand tighter monetary policy.”
Despite the robust labor market, other signs point to a slowing economy as the Fed applies the brakes. Since hiring frequently continues to be strong in the early phases of a recession, some economists argue that job growth alone is an inaccurate signal of a downturn.
For instance, according to Societe Generale Cross Asset Research, in the three months just before the housing crash-caused recession that began in December 2007, the labor department’s monthly payrolls survey showed the economy was adding roughly 300,000 jobs each month.