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Employers added 528,000 jobs in July, a surprisingly high number: NPR



TO MARTINEZ, HOST:

This morning’s jobs report shattered all expectations. The Labor Department says US employers created more than half a million jobs last month, while the unemployment rate fell to just 3 1/2%. Here to break it all down for us, we’re joined by NPR’s Scott Horsley. Scott, analysts expected a slowdown in job growth. So what does today’s report tell us?

SCOTT HORSLEY, BYLINE: Well, there’s no slowing down, that’s for sure. The employment engine is still running at full speed. The United States added more than twice as many jobs last month as analysts predicted. And the labor market has really shown remarkable strength in the face of high inflation and signs of slowing economic growth. Not only did the economy add more jobs than expected last month, but job gains for May and June were also revised upwards. Thus, the US economy has now replaced all of the jobs that were lost in the early months of the pandemic. Additionally, the unemployment rate has returned to its February 2020 level before the coronavirus disrupted economic activity.

MARTINEZ: Okay. So where are all the new jobs coming from?

HORSLEY: Well, last month’s gains were pretty widespread. Bars and restaurants continue to hire more workers. Factories added 30,000 jobs last month. Retail stores added more than 20,000 jobs. Even construction companies were hiring in July. They added 32,000 jobs, although we saw a slowdown in residential construction due to rising mortgage rates.

MARTINEZ: So does this jobs report end the talk of the recession?

HORSLEY: It’s pretty clear that the United States is not in a recession right now. This is despite last week’s GDP report, which showed the economy contracted in the spring for the second quarter in a row. There’s an old rule of thumb that two consecutive quarters of falling GDP often signals a recession. But as Federal Reserve Chairman Jerome Powell said last week, it’s just hard to reconcile that with an economy that has created more than 3 million jobs this year.

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JEROME POWELL: If you think about what a recession really is, it’s a generalized decline in many industries that lasts longer than two months. And it just isn’t – it doesn’t look like that.

HORSLEY: Instead, we’re seeing widespread hiring, fierce competition for workers, average wages in July were up 5.2% from a year ago. Now that’s good for workers, but it’s actually a little concerning for Powell and the Fed because it has the potential to fuel higher inflation. The central bank would actually like to see some cooling in the labor market, as that would help keep prices in check. There’s no cooling in today’s report, however. Now, none of this is to say that we won’t see a recession in the future. Some investors worry that the Fed will have to raise interest rates even more aggressively now to rein in inflation, which could trigger a recession in the future. As a result, the stock market opened lower this morning, although traders pared those losses over the past hour or so.

MARTINEZ: Are there any other worrying signs in today’s report?

HORSLEY: Yeah, we had hoped those big job gains would draw more people into the job market. And instead, we actually saw a drop in the labor force for the second month in a row. Now, part of the July drop was in teens. The labor force participation rate among people in their early working years has actually increased slightly. But there are still far more vacancies than unemployed people looking for work. We also saw a slight increase in the number of people working part-time in July, even though they wanted to work full-time. In some cases, these are workers whose hours have been reduced because demand has slowed. We also saw signs of this in some of the payrolls data, which is why many forecasters were forecasting weaker job growth in July. But overall, today’s report shows that the labor market remains extremely tight.

MARTINEZ: This is Scott Horsley from NPR. Scott, thank you very much.

HORSLEY: You’re welcome.

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