Economy

< The job market got even better, in a surprisingly positive sign for the economy

The job market got even better, in a surprisingly positive sign for the economy

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A MARTÍNEZ, HOST:

This morning's jobs report shattered all expectations. The Labor Department says U.S. employers added 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 had been expecting a slowdown in job growth. So what does today's report tell us?

SCOTT HORSLEY, BYLINE: Well, there's no slowdown, that's for sure. The jobs engine is still in high gear. The U.S. added more than twice as many jobs last month as analysts had 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 the job gains for May and June were also revised up. So the U.S. economy has now replaced all the jobs that were lost in the first few months of the pandemic. What's more, the unemployment rate is back to where it was in February of 2020 before the coronavirus upended economic activity.

MARTÍNEZ: All right. So where are all the new jobs coming from?

HORSLEY: Well, the gains last month were pretty widespread. Bars and restaurants continue to hire more workers. Factories added 30,000 jobs last month. Retail shops added more than 20,000 jobs. Even construction companies were hiring in July. They added 32,000 jobs, even though we have seen a slowdown in homebuilding as mortgage rates have gone up.

MARTÍNEZ: So does this jobs report then put an end to recession talk?

HORSLEY: It's pretty clear the U.S. is not in a recession right now. That's despite last week's GDP report, which showed the economy shrank during the spring for the second quarter in a row. There is 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 square that with an economy that's added more than 3 million jobs this year.

(SOUNDBITE OF ARCHIVED RECORDING)

JEROME POWELL: If you think about what a recession really is, it's a broad-based decline across many industries that's sustained for more than a couple of months. And it just doesn't - this doesn't seem like that.

HORSLEY: Instead, we are seeing broad-based hiring, stiff competition for workers, average wages in July were up 5.2% from a year ago. Now, that's good for workers, but it is actually a little bit worrisome for Powell and the Fed because it does have the potential to fuel higher inflation. The central bank would actually like to see some cooling in the job market because that would help to get prices under control. There's no cooling in today's report, though. Now, none of this is to say we won't see a recession in the future. Some investors do worry that the Fed will have to raise interest rates even more aggressively now to curb inflation, and that could trigger a recession in the future. The stock market opened lower this morning as a result, although traders have pared those losses in the last hour or so.

MARTÍNEZ: Any other worrisome signs in today's report?

HORSLEY: Yeah, we had hoped that these strong job gains would lure 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, some of the drop in July was teenagers. The labor force participation rate among people in their prime working years did actually inch up a bit. But there's still a lot more vacant jobs than there are unemployed people out there looking for work. We also saw a modest uptick in the number of people who had part-time jobs in July, even though they wanted to be working full time. In some cases, these are workers who've had their hours cut back because demand has slowed. We also saw signs of that in some of the payroll data, which is why a lot of forecasters were predicting weaker job growth in July. But overall, today's report shows the job market remains extremely tight.

MARTÍNEZ: That's NPR's Scott Horsley. Scott, thanks a lot.

HORSLEY: You're welcome.

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