Image Source: VOA News
Despite high inflation, stricter monetary policy, and limited fiscal support, the US economy unexpectedly added 528,000 jobs in July, and the unemployment rate dropped to a half-century low, easing fears of a recession.
In comparison to June, when the economy generated 398,000 jobs—more than twice as many as the 250,000 jobs economists had predicted—the figures revealed a faster rate of job growth.
The unemployment rate decreased slightly from 3.6 percent to 3.5 percent, reaching the 50-year low it had attained right before the Covid-19 pandemic began in 2020.
The data, which were made public on Friday, show that the US labor market has fully recovered from the loss of jobs caused by the pandemic, which started in February 2020. This will allay worries about a slowdown in the world’s largest economy just months before the crucial midterm elections, which will determine which party controls Congress. They might also give the Federal Reserve more confidence to continue rapidly tightening monetary policy in an effort to control rising prices.
Despite the majority of Americans disapproving of his management of the economy, President Joe Biden praised the findings in a statement as proof that his economic policies were effective.
“More individuals are employed than ever before in American history.” He continued, “the outcome of my economic strategy is to develop the economy from the center out and the bottom up.”
According to figures on a gross domestic product released last week, the US’s output decreased for the second quarter, raising concerns about the economy’s health. The National Bureau of Economic Research, which determines what constitutes a recession in the US, has not declared that one is underway, but any significant decline in employment growth may worsen these worries.
Senior members of the Biden administration have brushed aside concerns that the US is in a recession, saying the economy is still in good shape and is simply transitioning from the boom it enjoyed last year to a slower footing.
Jay Powell, the chairman of the Federal Reserve, has advised against reading too much into the GDP data and stated that he still believes interest rates could rise further without causing a harsh recession. However, he has cautioned that the route to that result is becoming “narrower.”
Separate statistics from the US Labor Department released on Thursday indicated that 260,000 people had applied for unemployment benefits in the previous week, which is the biggest amount in more than six months and raises concerns about the state of the labor market.
There are more jobs opening-up
When his financial technology business announced a round of layoffs a few weeks ago, product manager Ian Charles lost his job. The company cited a change in investor mood, making it more difficult for start-ups to secure capital.
The 33-year-old was shocked and terrified at the same time, initially recalling how challenging his job search had been a few years prior. But “it’s an entirely different ballgame this time,” he declared.
According to analysts, the Federal Reserve is likely to continue rapidly raising interest rates due to the strong hiring.
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In response to consumer prices rising at their quickest rate since 1981, the bank has already announced rate increases four times since March. Inflation increased once more in June, reaching 9.1 percent.
Pay increases as well, though not as quickly. According to the study released on Friday, hourly wages increased by 5.2% from July 2021.
The jobs data was “uncomfortably hot,” said economist Jason Furman, who counseled former president Barack Obama and is currently a Harvard professor.
On Twitter, he said: “Nice to see this many jobs added, but it is frightening about what it indicates for the size of the adjustment we may have coming.” “Recession is no longer as worrying. Worry is more about inflation. More action from the Fed will probably be required.”