People walk past a store in Washington, DC, the United States, May 11, 2022. (Xinhua/Liu Jie)
U.S. employers added 528,000 jobs in July, showing the labor market has now recovered the 22 million jobs lost due to COVID-19-related business restrictions from 2020. However, economists are divided on the direction of the economy.
by Matthew Rusling
WASHINGTON, Aug. 5 (Xinhua) — A surprisingly robust jobs report casts doubt on whether the United States is in a recession, amid some economists’ dire and dire predictions of a slowdown.
U.S. employers added 528,000 jobs in July, according to Friday’s Labor Department report, which showed the labor market has now recovered the 22 million jobs lost due to COVID-19-related restrictions on workplaces. companies from 2020.
The unemployment rate fell from 3.6% to 3.5%, matching 50-year highs before the pandemic, which were reached under the administration of former President Donald Trump.
Economists had predicted the economy would add 250,000 jobs, less than half of what Friday’s report showed.
The number was a victory for US President Joe Biden, who was dogged by record poll numbers and runaway inflation.
“Today, the unemployment rate is at its lowest in over 50 years: 3.5%,” Biden said in a statement Friday morning. “More people are working than at any time in American history.”
The situation is unusual, as it comes against the backdrop of soaring inflation, shrinking gross domestic product (GDP), record low consumer confidence and a slowing economy.
The U.S. economy contracted at an annual rate of 0.9% in the second quarter after contracting 1.6% in the previous quarter, the U.S. Commerce Department reported in a “preliminary” estimate last week. This meets the technical definition of a recession.
Tourists walk on the National Mall in Washington, DC, the United States, on July 24, 2022. (Photo by Aaron Schwartz/Xinhua)
But people are still spending and traveling, and Friday’s strong jobs report is the latest evidence to support some economists’ argument that the economy is not yet in recession.
“Broadly speaking, the economic data is currently sending mixed messages, and the white-hot payrolls numbers look increasingly out of step with other data points,” wrote economists Sarah House and Michael Pugliese. at Wells Fargo Securities, in an analysis. .
Economists are divided on the direction of the economy.
“The economy is clearly very strong and wages are rising rapidly. This is inconsistent with the contraction in GDP. I expect upward revisions,” Dean Baker, senior economist at the Center for Economic and Policy, told Xinhua. Research.
But others remain suspicious.
“The future direction of the economy remains highly uncertain,” Barry Bosworth, a senior fellow at the Brookings Institution, told Xinhua.
The report is “good for jobs, but not for the FRB,” Bosworth said, referring to the Federal Reserve Board.
“That should raise expectations for further rate hikes,” Bosworth said.
Echoing his view, House and Pugliese noted that job growth of more than half a million jobs per month and a falling jobless rate will give the Fed the confidence it needs. to “aggressively pursue its fight against inflation”.
“At least a 50 basis point rate hike at the September 20-21 FOMC (Federal Open Market Committee) meeting seems likely at this point,” they said, adding that another 75 basis point hike Core “could be in store” if inflation over the next two consumer price index reports shows no signs of trending lower.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, the United States, June 16, 2022. (Photo by Michael Nagle/Xinhua)
Markets fell on the monthly jobs report in early trading on Friday before breaking even by the end of the day.
The Dow Jones Industrial Average fell before recovering its losses late in the day. The Nasdaq sank a moderate 0.50% at the end of Friday’s session.
Investors fear a booming jobs sector could boost inflation, which is at its highest level in 40 years. This, in turn, could prompt the Fed to continue raising interest rates, which could slow the economy and hurt the labor market.
Even Fed Chairman Jerome Powell recently said the process of lowering inflation would likely involve a period of below-trend economic growth and “some easing of labor market conditions.”
The jobs report, however, is a silver lining in the Democrats’ dark cloud, as Biden’s approval rating sits at an all-time high of 39.5%, according to RealClearPolitics’ polling average.
Inflation is showing signs of slowing down. Despite a strong jobs sector, millions of Americans are still feeling the pain of record high food and gas prices.
All of this could lead to a Republican wave in November’s midterm elections, many experts say.
Darrell West, a senior fellow at the Brookings Institution, told Xinhua that the jobs report “suggests the economy could be stronger than generally believed, which would help Democrats considerably in November if this good news continues”.
“There is a strong connection between the economy and voting, so the stronger the economy, the better off Democrats will be,” West said.
Christopher Galdieri, an assistant professor at Saint Anselm College, told Xinhua: “More jobs and lower unemployment is always good news for presidents. The question this year is whether that’s enough to offset high inflation in the minds of voters.
“President Biden has won a number of legislative victories lately…but that hasn’t done much to boost his approval rating. Democrats will likely be hoping voters will see that as a reason to keep them going. in power,” Galdieri said. ■