Hiring in July was far better than expected, defying signs that the economic recovery is losing steam, the Bureau of Labor Statistics reported Friday.
Nonfarm payrolls rose 528,000 for the month and the unemployment rate was 3.5%, easily topping the Dow Jones estimates of 258,000 and 3.6% respectively.
Wage growth also surged higher, as average hourly earnings jumped 0.5% for the month and 5.2% from the same time a year ago. Those numbers add fuel to an inflation picture that already has consumer prices rising at their fastest rate since the early 1980s. The Dow Jones estimate was for a 0.3% monthly gain and 4.9% annual increase.
Markets initially reacted negatively to the report, with Dow Jones futures down more than 200 points.
Leisure and hospitality led the way in job gains with 96,000, followed by professional and business services with 89,000. Health care added 70,000 and government payrolls grew 57,000. Goods-producing industries also posted solid gains, with construction up 32,000 and manufacturing adding 30,000.
Despite downbeat expectations, the July gains were the best since February and well ahead of the 388,000 average job gain over the past four months. The BLS release noted that total nonfarm payroll employment has increased by 22 million since the April 2020 low when most of the U.S. economy shut down to deal with the Covid pandemic.
The bureau noted that private sector payrolls are now higher than the February 2020 level, just before the pandemic declaration, though government jobs are still lagging.
The unemployment rate ticked down, the result both of strong job creation and a labor force participation rate that declined 0.1 percentage point to 62.1%, its lowest level of the year.
Economists have figured job creation to begin to slow as the Federal Reserve raises interest rates to cool inflation running at its highest level in more than 40 years.
The strong jobs number coupled with the higher than expected wage numbers led to a shift in expectations for September’s expected rate increase. Traders are now pricing in a higher likelihood of a 0.75 percentage point hike for the next meeting, which would be the third straight increase of that magnitude.
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