WASHINGTON (AP) – United States (US) employers added an astonishing 528,000 jobs last month despite flashing warning signs of an economic downturn, easing fears of a recession and handing President Joe Biden some good news heading into the midterm elections.
Unemployment dropped another notch, from 3.6 per cent to 3.5 per cent, matching the more than 50-year low reached just before the pandemic took hold.
The economy has now recovered all 22 million jobs lost in March and April 2020 when COVID-19 slammed the US.
The red-hot numbers reported on Friday by the Labor Department are certain to intensify the debate over whether the US is in a recession.
“Recession – what recession?’’ wrote chief economist at Fitch Ratings Brian Coulton. “The US economy is creating new jobs at an annual rate of six million – that’s three times faster than what we normally see historically in a good year.”
Economists had expected only 250,000 new jobs last month, in a drop-off from June’s revised 398,000. Instead, July proved to be the best month since February.
The strong figures are welcome news for the Biden administration and the Democrats at a time when many voters are worried about the economy.
Inflation is raging at its highest level in more than 40 years, and the economy has contracted for two quarters in a row, which is the common – but informal – definition of a recession and does not take into account a host of other factors economists consider, such as the job picture.
At the White House, Biden credited the job growth to his policies, even as he acknowledged the pain being inflicted by inflation.
He emphasised the addition of 642,000 manufacturing jobs on his watch.
“Instead of workers begging employers for work, we’re seeing employers have to compete for American workers,” the president said.
Biden has boosted job growth through his USD1.9 trillion coronavirus relief package and USD1 trillion bipartisan infrastructure law last year. Republican lawmakers and some leading economists, however, say the administration’s spending has contributed to high inflation.
The president has received some other encouraging economic news in recent weeks, as gasoline prices have steadily fallen after averaging slightly more than USD5 a gallon in June.
On Wall Street, stocks closed mostly on lower on Friday. The good news about job creation was mostly offset by worries that the Federal Reserve will have to keep aggressively raising interest rates to cool the economy and tamp down inflation.
“The strength of the labour market in the face of rate-tightening from the Fed already this year clearly shows that the Fed has more work to do,” said senior investment strategist at Allianz Investment Management Charlie Ripley. “Overall, today’s report should put the notion of a near-term recession on the back burner for now?”
The Labor Department also reported that hourly earnings posted a healthy 0.5 per cent gain last month and are up 5.2 per cent over the past year. But that is not enough to keep up with inflation, and many Americans are having to scrimp to pay for groceries, gasoline, even school supplies. Job growth was especially strong last month in the health care industry and at hotels and restaurants.
The number of Americans saying they had jobs rose by 179,000, while the number saying they were unemployed fell by 242,000. But 61,000 Americans dropped out of the labour force in July, trimming the share of those working or looking for work to 62.1 per cent from 62.2 per cent in June.
New Yorker Karen Smalls, 46, started looking for work three weeks ago as a member of the support staff for social workers.
“I didn’t realise how good the job market is right now,’’ she said after finishing her fifth interview this week. “You look at the news and see all these bad reports… but the job market is amazing right now.’’
A single mother, she is weighing several offers, looking for one that is close to home and pays enough to let her take care of her two children. Two years ago, the pandemic brought economic life to a near standstill as companies shut down and millions of people stayed home or were thrown out of work. The US plunged into a deep, two-month recession.
But massive government aid – and the Fed’s decision to slash interest rates and pour money into financial markets – fuelled a surprisingly quick recovery. Caught off guard by the strength of the rebound, factories, shops, ports and freight yards were overwhelmed with orders and scrambled to bring back the workers they furloughed when COVID-19 hit.
