Hiring increased in July, with U.S. employers adding 528,000 jobs last month, the Labor Department said Friday. It far exceeded economists’ expectations of a gain of 250,000 new jobs in the period. That was also a jump from last month, when businesses addeddespite the highest inflation in 40 years.
The unemployment rate fell to 3.5% from 3.6% in June, which is the lowest since February 2020, just before the COVID-19 pandemic broke out in the United States. Before the latest payrolls report, the economy was adding roughly 450,000 jobs per month.
Both total non-farm employment and the unemployment rate have returned to their pre-pandemic levels.
The employment figures underline the resilience of the economy after two in a row, which is considered a hallmark of a recession. Despite this shrinking economic growth, hiring has remained robust as businesses continue to add jobs and retain their current workers amid strong consumer demand.
“This is a job market that just won’t quit. It’s defying the rules of economics,” Becky Frankiewicz, chief commercial officer of staffing firm ManpowerGroup, said in an email after the data was released. “The economic indicators signal caution, but US employers signal confidence.”
Why stocks can fall
Last month’s buoyant job growth is likely to weigh on stocks in the near term because it suggests the Federal Reserve may continue to aggressively raise interest rates to curb inflation. S&P 500 futures were down 0.7% before the market opened Friday, according to FactSet.
The central bank has raised interest rates in an attempt to tame inflation, which is running at its hottest levels in four decades. With the Fed’s four rate hikes so far this year, it will be more expensive for consumers and businesses to borrow. Economists had expected this to help companies pull back on hiring, but July’s numbers show employers are continuing to add workers.
The July payrolls “reflect an economy that is operating at a very robust level, one that is clearly not in recession and that can withstand tighter monetary policy,” Wall Street analyst Adam Crisafulli of Vital Knowledge said in a client note.
Despite the strong labor market, other indicators show the economy is slowing as the Fed pumps the brakes. Some analysts point out that job growth alone is an unreliable indicator of a downturn, noting that hiring often remains strong in the early stages of a recession.
For example, in the three months immediately preceding the housing crash-induced recession that began in December 2007, the Labor Department’s monthly payrolls survey showed the economy gaining nearly 300,000 jobs per month, according to Societe Generale Cross Asset Research.