US employment rebounded surprisingly to pre-pandemic levels in July, news welcomed by President Joe Biden ahead of key midterm elections – but raising concerns of sky-high inflation.
Even the White House had agreed with most economists that hiring numbers would slow last month, which Biden said was part of the natural downward trend after the world’s largest economy recovered quickly from the pandemic downturn.
Instead, US job growth surged in July as the economy surprisingly added 528,000 jobs, more than double what economists were expecting, according to official data released on Friday.
“Today, the unemployment rate is at its lowest level in more than 50 years: 3.5 percent,” Biden said in a White House statement.
“More people are working than at any time in American history…there’s more to do, but today’s jobs report shows we’re making significant strides for working families.”
June’s outsized job gains were revised upwards, as was May’s – a total of 28,000 jobs were added to the original report, the Labor Department reported.
Meanwhile, the closely watched report showed that wages have skyrocketed – with an average hourly wage of 15 cents from June – stoking concerns about a possible wage-price spiral. In the past 12 months, average hourly earnings have increased by 5.2 percent.
With inflation above 9 percent, the highest in more than 40 years, the Federal Reserve has aggressively raised interest rates to cool the economy, and economists now say a third big three-quarter-point hike in September is likely.
Wall Street opened sharply lower on concerns about impending rate hikes.
– ‘wow’ –
Total non-farm payrolls also recovered to pre-pandemic levels, the data showed, with new hires rising to over 430,000 over the past three months.
KPMG economist Diane Swonk’s initial reaction: “Wow.”
“This report pushes the Fed AGAIN for a 75 basis point move in September,” she said on Twitter.
Hiring was strong in leisure and hospitality and healthcare, each adding 96,000 or more, while manufacturing and construction added at least 32,000.
Builders have struggled for months to find workers to meet high construction demand, but employment in the industry is now back to pre-pandemic levels, the report said.
But there were also signs of tension. The number of people working part-time for economic reasons, which had fallen sharply in June, recovered again in July. And more workers are taking on part-time jobs, including 403,000 with two full-time jobs.
“Recession is now less of a concern. Inflation is more of a concern,” Harvard economist Jason Furman tweeted. “The Fed will probably have to do more.”
The central bank will receive two more jobs reports and several inflation reports before its next meeting in mid-September.
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