US hiring rose dramatically in July as the economy added 528,000 new jobs and the unemployment rate fell to 3.5%, according to data released by the Bureau of Labor Statistics on Friday.
The report defied expectations of a slowdown in hiring as the Federal Reserve conducts an anti-inflation fight aimed at curbing demand by slowing the economy but could plunge the country into recession.
Evidence of a softening job market had piled up this week amid layoffs at high-profile companies like Walmart and Robinhood, and a government report showing a sharp drop in job vacancies in June.
The 528,000 jobs added in July mark a significant increase from the 372,000 jobs added in June. In addition, the numbers signal an improvement from the already resilient hiring that lasted through the first half of 2022, when the economy added an average of 461,000 jobs each month.
Overall robust hiring in recent months has defied typical recession conditions, Daniel Zhao, senior economist at careers site Glassdoor, told ABC News before the data was released.
“It would be very unusual to have a recession when we’re still creating several hundred thousand jobs a month,” he said.
While a faster pace of hiring may please some economists and ordinary Americans, the signal of rising labor demand could put more pressure on the Fed to continue its aggressive rate hikes. At meetings over the past two months, the central bank has raised its benchmark interest rate by 0.75% – dramatic increases last seen in 1994.
Despite a series of increases in the cost of borrowing intended to lower prices, inflation has not only persisted but actually gotten worse. Data released last month showed prices rose a staggering 9.1% in June, the highest inflation rate in more than four decades.
Worryingly, price increases coincided with contracting economic output. Gross domestic product fell at an annualized rate of 0.9% in the second quarter after falling 1.6% in the previous quarter.
The recent trend lends itself to the short definition of a recession, consisting of two consecutive quarters of contraction in GDP. But formally labeling a recession depends on a broader set of metrics weighed by the National Bureau of Economic Research.
So far this year, the tight labor market has offered a strong corner of the economy. But jobs data pointed to a slowdown on Tuesday, as a report released by the government showed job vacancies fell precipitously in June to a nine-month low. However, the 10.7 million job vacancies reported in June remain a high number.
Meanwhile, a number of large companies have announced job cuts or hiring slowdowns in recent days. Walmart laid off nearly 200 company employees on Wednesday, the Wall Street Journal reported. A day earlier, Robinhood announced it would cut 23% of its workforce. Tech giants Apple, Amazon and Google parent Alphabet recently announced they will slow hiring.
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