The Labor Department reported Friday that July saw an increase in hiring with U.S. companies creating 528,000 jobs last month. The gains were far greater than economists expected, with 250,000 additional jobs created during this period. This was also an increase from the previous month when businesses added.Despite the fact that inflation has been at its highest point in 40-years.
The unemployment rate fell to 3.5% in June from 3.6% in June. This is the lowest level since February 2020 when the COVID-19 pandemic hit the U.S. Prior to the latest payrolls report the economy was adding approximately 450,000 jobs each month.
Both the nonfarm total employment and jobless rate are back to pre-pandemic levels.
The economy is resilient after two straight years of hard work, as evidenced by the employment numbersA recession is defined as a period of low economic growth. Despite the decline in economic growth, hiring has remained strong as businesses continued to add jobs and keep their workers despite high consumer demand.
“This is a job marketplace that won’t stop. It’s challenging the rules of economics,” said Becky Frankiewicz, chief commercial officer of hiring company ManpowerGroup in an email after the data was released. “Economic indicators are warning of caution, but American employers are showing confidence.
Why stocks could fall
Stocks will likely be affected by last month’s strong job growth. This suggests that the Federal Reserve could continue to increase interest rates aggressively to reduce inflation. S&P 500 futures were down 0.7% prior to the market’s open on Friday, according to FactSet.
In an attempt to control inflation, the central bank has increased rates to try and contain it. This is the highest level in over 40 years. Consumers and businesses are finding it more difficult to borrow money due to the Fed’s four rate increases so far this year. Economists predicted that businesses would be less likely to hire, but July’s figures show that employers continue to hire workers.
According to Vital Knowledge Wall Street analyst Adam Crisafulli in a client letter, the July payroll number “reflects an economy operating in a very robust state, one that is obviously not in recession”
The Fed is easing the brakes, despite a strong labor market. However, there are other indicators that indicate the economy is slowing. Analysts argue that the only indicator of a downturn is job growth. However, hiring can often remain strong during the early stages of recession.
According to Societe Generale Cross Asset Research, the economy gained nearly 300,000. In the three months immediately before the housing crash-induced recession began in December 2007, for example.
Source: CBS News