The U.S. labor market continues defy predictions and pronouncements of an imminent recession, adding jobs at a scorching pace and driving unemployment down to its pre-pandemic low.
U.S. employers boosted payrolls by 528,000 jobs in July, building on the nearly 400,000 added in June and pushing overall employment above the pre-pandemic peak in February 2020, the Labor Department reported Friday. The unemployment rate slipped to 3.5 percent from 3.6 percent in June while wages jumped more than 5 percent over the year.
“The job market continues to defy the laws of physics,” said Parker Harvey, principal economist for Workforce Solutions, a regional workforce development agency.
Economists had expected the nation to add only about 250,000 jobs last month as signs mounted that U.S. economy was slowing and perhaps headed to recession. Inflation continues to run at 40-year highs, eroding buying power and squeezing household budgets. Home sales are plunging as higher interest rates push buyers out of the market. Gross domestic product, which measures the output of the economy, shrank for the second consecutive quarter — a development that many economists said signaled the start of the recession.
But employers haven’t seemed to care this summer. Typically when recession concerns begin to mount, companies pull back on hiring. But, as the July statistics, show they are instead accelerating hiring, pushing annual job growth to more than 4 percent.
In Texas and Houston, employment has grown faster, aided by high energy prices and record profits of the state’s oil and gas companies. In June, both state and the region added jobs at an annual rate of about 6 percent. Historically, economists say, Houston would add about 65,000 jobs a year. In the first six months of 2022 alone, the region has gained nearly 85,000, according to Pat Jankowski, senior vice president of research for the Greater Houston Partnership, a business-financed economic development group.
Harvey called it “truly astonishing.” The Texas Workforce Commission will release state and regional employment statistics in about two weeks.
William W. Beach, commissioner of the Bureau of Labor Statistics, said national job growth last month was broad-based. Leisure and hospitality, which includes bars, restaurants and hotel, led the gains by adding 96,000 jobs last month. But the sector, among the hardest hit by the pandemic and social distancing restrictions, is still down by 1.2 million jobs, or 7.1 percent, from its February 2020 level.
Professional and business services added 89,000 jobs last month and health care, gained 70,000. Construction added 32,000 jobs in July, and manufacturing employment increased by 30,000.
Mining added 7,000 jobs over the month, of which 2,000 were in oil and gas extraction.
The scorching report makes it all the more likely that the Federal Reserve will once again raise interest rates when policy makers meet next month. The central bank is trying to slow the economy and bring inflation under control — to which rising wages are contributing. In June, inflation climbed to 9.1 percent — a 40-year high — driven by a 41.6 increase in energy costs since June 2021.
Since then, the price of oil has fallen sharply. Oil this week fell to its lowest level since February — before the Russian invasion of Ukraine — and settled Friday at $89.01 a barrel in New York.
The July jobs numbers also complicate the debate over whether the United States is already in, or heading towards, a recession. A general rule of thumb has been that two consecutive quarters of negative growth in gross domestic product signals a recession, but other indicators, in particular the job numbers, do not, Harvey said.
“From a labor market data standpoint, it’s hard to make the case at the national level — and we certainly can’t make the case at the local one,” said Harvey.
Harvey added that it’s worth keeping in mind that the severe and sudden downturn triggered by the pandemic was unlike anything experienced in post-World War II history, confounding traditional assumptions of how the economy would respond and recover.
“Things just don’t look the way we would expect, given the disruptive effects are still rippling through the economy,” Harvey said. “You’re just not getting things that look normal.”