Minneapolis CNN –
The US job market has returned to pre-pandemic levels.
Employers added just 187,000 jobs in July, according to new data released Friday by the Bureau of Labor Statistics, slightly above the monthly average seen in the decade before the pandemic.
Economists were expecting a net gain of 200,000 jobs last month. June job growth was revised down from 209,000 to 185,000 jobs.
“While the labor market is still flexible, there are still more job opportunities than candidates looking for work,” said Amy Glaser, senior vice president at staffing firm Adecco. “It matches what we’re seeing, and I think it’s going to continue that way.”
The headline numbers for July and the overall monthly job declines for May and June (decreases of 25,000 jobs and 24,000 jobs, respectively) are signs that the country’s labor market is slowly cooling. In addition, it further fueled the notion that the Federal Reserve could achieve a “soft landing” of reining in inflation without massive layoffs.
And although the strong jobs data came just days after the United States downgraded the Fitch rating for its fiscal health, Friday’s report is also just the latest in a series of positive economic news that should push predictions of a recession either way ahead. increases or eliminates them completely.
The unemployment rate fell from 3.6% to 3.5% in July. During the past 16 months, the unemployment rate has ranged between 3.5% and 3.7% – levels not seen in more than 50 years.
“It’s a Goldilocks kind of economy,” Brian Bethune, an economist and professor at Boston College, told CNN. “It’s not too fast, and it’s not too slow, and that’s exactly where you want to be.”
He said there should be a substantial increase in productivity, which is important to keep inflation low.
The Fed is preparing for a 16-month campaign to curb decades-high inflation by suppressing demand. The central bank has essentially raised its benchmark interest rate from 0 to 11 times to a range of 5.25% and 5.5%, the highest level in 22 years.
Key inflation measures have shown that price increases have largely moderated over the past year while the US economy continues to grow.
The industries that saw the most employment growth in July were health care, social assistance, financial activities, and wholesale trade.
Gains were more modest in the leisure and hospitality industry, which is hiring like gangbusters to fill the pandemic’s deep losses and keep up with consumers who have an insatiable (and understandable) demand for out-of-home experiences Is.
“Weak gains are [in leisure and hospitality], although they are understaffed relative to pre-Covid levels,” Andrew Patterson, global chief economist at Vanguard’s Investment Strategy Group, told CNN. “But it could be a sign of a reduction in discretionary spending.”
Fed officials are hoping their aggressive rate-hike campaign will offset a slump in the job market — particularly in wage gains, which is seen as a contributor to inflation.
Economists were expecting to see a slight reduction in wage growth; However, it remained stable for the second month in a row.
Friday’s report showed that average hourly earnings growth was unchanged at 0.4% from last month and also unchanged at 4.4% year-over-year.
“The Fed wants to see it go down,” Patterson said. “So, there is reason to believe that there are signs of weakness in the labor market, but the Fed still has more work to do.”
According to Refinitiv, economists had forecast a monthly increase of 0.3% and an annual increase of 4.2%.
According to the report, labor force participation also remained stable at 62.6%.
Job opportunities are abundant (there were 9.6 million of them in June), people are being hired, and even though there are fewer people looking for jobs, they are staying on unemployment lists longer.
In July, the share of workers who were out of a job for more than three and a half months rose 3 percentage points to 36.9%, the highest level in more than a year, according to Friday’s report.
Within that group, the share of unemployed people who had been looking for work between 15 weeks and six months rose to its largest since November 2020, BLS data shows.
The labor market remains consistent with historical standards; However, Giacomo Santangelo, economist at employment website Monster and senior lecturer in economics at Fordham University, told CNN earlier this week that finding workers and filling jobs can be heavily influenced by factors such as skills, geography and inflation.
Even though some industries (such as health care) need employees, it is not an easy transition for workers like longtime truck drivers. And even if there are jobs available in your area in another state, relocating is not easy.
Inflation also plays a role, Santangelo said.
“Just because there is a job opportunity, it does not mean that an unemployed person will apply for the job,” he added. “Indeed, we can find a fully employed person who can take on additional work to meet labor demands as well as cope with inflation.”
For the most part, it has been stable as she navigates the US jobs market.
After a three-year rollercoaster ride full of unexpected twists and turns, the labor market is back on track. At this time last year, job opportunities were shrinking and economists were expecting payroll benefits to shrink. Instead, the July 2022 jobs report delivered a huge surprise by adding 568,000 positions – more than double expectations.
This time there was no surprise factor: The 187,000 net jobs gain in July was equal to the revised 185,000 gain in June.
“This is a remarkably remarkable report,” said Rucha Vankudre, senior economist at Lightcast, in comments. “Everything is trending as expected, which is a good thing.”
The US economy has now added jobs for 31 consecutive months, and its monthly job growth is approaching the monthly average of 184,000 jobs seen in the decade before the pandemic, when the country saw its last major economic expansion.
What’s helping to drive that strong and steady growth this time is the jobs market itself: The strong and tight labor market has kept wages rising, which in turn has helped boost consumer spending, which has boosted demand. resulting in a need for businesses to hire. more workers.
Boston College’s Bethune said the latest data indicate the labor market is nearing a plateau, where monthly employment gains could fluctuate between 150,000 and 180,000.
“Now, if we can get some stability in terms of thinking about where the economy is going…this is recession obsession, and if the Federal Reserve can see the light there is a way out of the inflation problem,” he said. . , saying that this could help boost investment and stabilize the financial system.
Other economists say it may not be enough, and they expect the labor market to see further slippages to help push inflation down to the Fed’s 2% target.
“We believe unemployment will probably need to be brought down to around 4.5% to ease the pressure on wages needed to achieve that 2% target,” said Vanguard’s Patterson.
The Fed based its 2% target on the core personal consumption expenditure index, which measured 4.1% in June, according to Commerce Department data released last week. Next week, the BLS will release two key inflation reports for July: the Consumer Price Index and the Producer Price Index.