WASHINGTON | The US jobs market showed unexpected momentum in July, returning to pre-pandemic levels as the fight against inflation fuels fears of a recession, good news for Joe Biden a few months before the crucial midterm elections.
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There are now “more people working in the United States than before the pandemic began” and even “than at any time in American history,” said the US President from the House of Representatives.
The country regained the 22 million jobs lost to the pandemic and the unemployment rate fell to 3.5%, the same rate as in February 2020. The job market was then in its best shape in 50 years.
The health of employment is currently under a great deal of scrutiny in the United States. If this recovery confirms the notion that the world’s premier economy is not in recession, it is bad news for inflation, however.
“Strong consumer spending continued to drive strong demand for labor and support the job market,” said Julia Pollak, ZipRecruiter’s chief economist, in a blog post.
“This remains one of the strongest jobs markets in 50 years, no consolation for those hoping for a slowdown that would reduce inflation,” said Mike Fratantoni, chief economist for the Mortgage Bankers Association.
“Incredibly strong”
In July, twice as many jobs as expected were created (528,000 new hires), the Labor Department said on Friday, across all sectors, including leisure and hospitality, professional and commercial services and care and health.
In addition, job creations for May and June have been revised upwards to 386k and 398k, respectively, which is 28k more than announced.
However, this is not likely to last, because “the need for labor is expected to decrease […] moderate in the second half of 2022 as firms face higher costs, lower consumer demand and weaker profitability,” said Kathy Bostjancic, economist at Oxford Economics.
Meanwhile, competition remains fierce among employers trying to attract too few workers.
As a result, wages continue to rise. The average hourly wage in the private sector is now $32.27; it is thus 5.2% higher than a year ago.
However, this is not enough to offset inflation, which hit 9.1% over the year in June.
Joe Biden said he understands the struggles of families who “have jobs and are faced with rising prices for groceries, gas and many other commodities.” He urged the Senate to pass its big health and climate investment plan.
“Creepy”
The US Federal Reserve (Fed) is taking steps to try to cool down the overheated economy. To do this, it raises its interest rates to make credit more expensive and thus encourage consumers to spend less.
Those numbers should weigh heavily at their next monetary policy meeting in late September, convincing their officials to hit hard. They could raise rates again by three-quarters of a point, as in June, then in July — not since 1994 and a far cry from the usual quarter-point hike.
“It’s nice to see so many jobs being created, but it’s scary to imagine what that means for the scale of adjustment we may see coming,” said Harvard economics professor Jason Furman and former White House economic adviser under Barack Obama.
The New York Stock Exchange was in the red on Friday and feared an even stricter stance by the Fed.
Nonetheless, the first signs of a drop in employment were emerging.
Job vacancies fell to a nine-month low in June but layoffs remained high, according to Bureau of Labor Statistics data released on Tuesday.
Weekly jobless claims, which give an indication of the number of layoffs, started rising again in late July. The four-week moving average even reached its highest level since November.