Robust job gains surprised economists, but coupled with wage gains could stoke concerns about soaring US inflation
Washington (AFP) - US employment made a surprise recovery to pre-pandemic levels in July, news that was welcomed by President Joe Biden ahead of key midterm elections – but which fuels concerns over sky-high inflation.
Even the White House had agreed with most economists in predicting hiring would slow last month, which Biden had said was part of the natural downshift after the rapid rebound of the world’s largest economy from the pandemic downturn.
Instead, US job growth surged in July, as the economy added a surprising 528,000 positions, more than double what economists were expecting, according to official data released Friday.
“Today, the unemployment rate matches the lowest it’s been in more than 50 years: 3.5%,” Biden said in a White House statement.
“More people are working than at any point in American history … there’s more work to do, but today’s jobs report shows we are making significant progress for working families.”
The outsized job gain in June was revised higher, as was May – adding a total 28,000 positions to the initial report, the Labor Department reported.
Meanwhile, the closely-watched report showed wages jumped – with average hourly earnings up 15 cents over June – stoking concerns about a possible wage-price spiral. Over the past 12 months, average hourly earnings have increased by 5.2 percent.
With inflation topping nine percent, the highest in more than 40 years, the Federal Reserve has been raising interest rates aggressively to cool the economy, and economists now say a third big three-quarter-point hike is likely in September.
Wall Street opened sharply lower amid concerns about coming rate hikes.
- ‘Wow’ -
Total non-farm employment also recovered to its pre-pandemic level, the data showed, and hiring topped 430,000 in the past three months.
KPMG economist Diane Swonk’s initial reaction: “Wow.”
“This report pushes the Fed towards a 75 basis point move AGAIN in September,” she said on Twitter.
Hiring was robust in leisure and hospitality and health care, which each adding 96,000 or more, while manufacturing and construction gained at least 32,000.
Builders have struggled for months to find workers to meet high demand for construction, but employment in the sector is now back to its pre-pandemic level, the report said.
But there were signs of strains as well. The number of people working part time for economic reasons, which dropped sharply in June, rebounded in July. And a growing number of workers are taking on second jobs, including 403,000 with two full-time positions.
“Recession is now less of a worry. Inflation is more of a worry,” Harvard economist Jason Furman tweeted. “The Fed will likely need to do more.”
The central bank will get two more employment reports and multiple inflation reports before its next meeting in mid-September.