US Unemployment Back to Pre-Pandemic Levels at 3.5% in July
The U.S. economy added 528,000 jobs in the month of July, according to the latest data released by the U.S. Bureau of Labor Statistics (BLS). Surveyed analysts were looking for 250,000 jobs added while BLS data for June showed 372,000 jobs added.
Unemployment Data for July Better Than Expected
The unemployment rate came in at 3.5%, which compares to the general consensus of 3.6%. The unemployment rate for June was 3.6%.
Labor Force Participation, another metric closely watched by the Fed that measures the percentage of the total number of people of labor-force age that is in the labor force, came in at 62.1%. This compares to 62.2% in June.
Analysts were looking for a lower number of people who got into the workforce in July in response to higher initial claims and announced layoffs from big corporations, including Amazon, Tesla, and Walmart. According to Crunchbase data, over 32,000 people from the U.S. tech sector have lost their jobs in 2022.
Moreover, staff hiring is expected to slow in the coming months as the Fed’s aggressive tightening of financial conditions takes effect. The aim is clear – cool down raging inflation and bring it closer to the Fed’s target of 2%.
“At the moment, inflation is hurting everyone. It’s an equal opportunity scourge at this point. What policymakers are faced with is pushing the unemployment rate higher.”said Michael Gapen, chief U.S. economist at Bank of America.
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Starring at Recession?
Despite the very low unemployment rate and strong wage growth, some analysts are still concerned that the labor market is seeing great imbalances. Some industries are witnessing robust growth while others are facing a faster-than-expected slowdown.
For example, travel companies are struggling to hire more workers to cope with strong travel demand over summer while the construction sector is facing a slowdown as higher interest rates push mortgage rates up. Global airlines have canceled hundreds of flights this year due to a group of reasons, but mainly because of labor shortage.
Furthermore, many companies that reported Q2 earnings so far have warned they are slashing costs as the U.S. company potentially faces a recession. According to JPMorgan, the markets are now 40% pricing in the probability of a U.S. recession, down from 50% in June.
Were you surprised by the latest unemployment data? Let us know in the comments below.