The US economy has now regained all jobs lost during the pandemic, after a blowout July jobs report that showed a gain of 528,000 jobs, according to data released Friday by the Bureau of Labor Statistics.
The massive monthly gain was more than double the 250,000 that economists were expecting, according to Refinitiv.
The unemployment rate ticked down to 3.5% after holding at 3.6% for the past four months. The July jobless rate matched the half-century low last seen in February 2020.
Friday’s employment snapshot marks the 19th consecutive month of job growth and is the highest monthly gain since the economy added 714,000 jobs in February. July’s job totals outpace the average monthly gain of 388,000 jobs of the past four months, BLS data shows.
President Joe Biden on Friday hailed the July report and took a victory lap by crediting his economic policies for the gains.
“It’s the result of my economic plan to build the economy from the bottom up and middle out,” he said in a statement. “I ran for president to rebuild the middle class – there’s more work to do, but today’s jobs report shows we are making significant progress for working families.”
Job gains across the board – with one exception
The employment growth was widespread across sectors, with health care and leisure and hospitality seeing some of the biggest gains. However, employment in that key service sector is still more than 1 million jobs below its pre-pandemic level, according to the BLS.
Of the 528,000 jobs added, the lion’s share of the gains were in private-sector service-providing areas, including 122,000 in education and health services; 96,000 in leisure and hospitality (including 74,000 in restaurants and bars); and 89,000 in the professional and business services sector.
Prior to Friday’s report, which also included upward revisions totaling 28,000 jobs for May and June, the nation was about 524,000 jobs short of the employment level seen in February 2020.
In one giant fell swoop, that gap was erased.
However, a notable laggard persists: public-sector employment, notably city and county government and public education. Government-related jobs are 597,000 below where they were pre-pandemic.
“There’s just really strong competition with the private sector right now, and the public sector has not kept up its wage hikes in order to be able to compete with the private sector,” Nick Bunker, Indeed’s economic research director for North America, told CNN Business.
There’s still a shortage of workers
The labor force participation rate ticked down to 62.1% from June’s 62.2%, its third decline in as many months.
While labor demand remains incredibly strong, the supply of workers isn’t bouncing back like it was at the beginning of this year, Bunker said.
“There are concerns that demand remains very strong, but workers’ ability or willingness to take jobs is not as responsive to demand as some of us might have hoped,” he told CNN Business.
That imbalance has contributed to elevated levels of wage growth, he added.
As of July, average hourly earnings rose by 0.5% from the prior month and were up 5.2% over the past year. Still, those gains are being outpaced by the highest inflation in 40 years.
Wage growth “is certainly not accelerating in a way that is driving the kind of inflation we’re seeing in the economy,” said Elise Gould, senior economist with the Economic Policy Institute.
Economists had expected the labor market to show some cooling as it not only got closer to recovering the more than 20 million jobs lost during the pandemic but also reflected a broader slowdown in economic activity.
“Despite the two straight quarters of contraction in GDP in the first half of the year, these robust job market numbers strongly argue against recession talk,” Mark Hamrick, Bankrate’s senior economic analyst, said in a statement.
Double-edged sword
This report, viewed in conjunction with the latest data that shows job openings still far surpassing the number of people looking for work, could put pressure on the Federal Reserve to continue its spate of aggressive rate hikes, he added.
“As [Fed Chair] Jerome Powell and his colleagues continue to judge the job market as hot, that stays on the side of the ledger compelling them to continue to raise interest rates,” he said.
The Fed’s monetary policymaking committee next meets in late September, providing for plenty more economic data points to get added into the mix. The next big one comes on Wednesday, when the BLS releases its closely scrutinized monthly Consumer Price Index data.
Analysts and economists on Friday said they expect the Fed to hike rates by at least 75 basis points in September.
This has made Friday’s strong jobs report into a double-edged sword.
“What normally is good news for the economy, e.g., more people employed and earning a paycheck, has become a symbol of concern as inflation continues to remain above the Fed’s target,” Eugenio Aleman, Raymond James’ chief economist, said in a statement.
And, in turn, aggressive actions from the Fed could hit the most vulnerable Americans the hardest, EPI’s Gould said.
A sharp economic slowdown “could prematurely slow the advances we’ve seen in the labor market,” she said. “And when you do that, it is often some of the most racially and economically disadvantaged groups [being affected].”
CNN’s Betsy Klein contributed to this report.
