A better-than-expected jobs report on Friday displayed the resilient strength of the U.S. economy, even after years of high interest rates and stubborn inflation.
Employers hired 272,000 workers last month, blowing past economist expectations of 190,000 jobs added, U.S. Bureau of Labor Statistics data showed. The unemployment rate ticked up to 4%, reaching that level for the first time since January 2022.
The hiring exceeded the average number of jobs added each month over the previous year, and it accelerated notably from the 175,000 jobs added in April.
The blockbuster report defies the nation’s flagging economic growth. Gross domestic product slowed significantly at the outset of this year, suggesting that the prolonged policy of high interest rates had weighed on business investment and economic activity.
“The May jobs report was strong across the board,” Bret Kenwell, an investing analyst at eToro, told ABC News in a statement.
In theory, high interest rates depress consumer demand and slow price increases. Inflation has fallen significantly from a peak of 9.1%, but it remains more than a percentage point higher than the Fed’s target rate of 2%.
That economic slowdown appeared to manifest in a dip in job openings reported earlier this week. Job openings fell in April to the lowest level since February 2021, BLS data on Tuesday showed.
Federal Reserve Chair Jerome Powell holds a press conference following the U.S. central bank’s two-day policy meeting, May 1, 2024, in Washington.
Kevin Lamarque/Reuters, FILE
However, the labor market surprised observers on Friday with a burst of hiring that improves the economic outlook but may complicate the Fed’s decision next week on a possible interest rate cut.
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The Fed risks a rebound of inflation if it cuts interest rates too quickly, since stronger consumer demand on top of solid economic activity could lead to an acceleration of price increases.
Average hourly wages surged 4.1% over the year ending in May, the fresh data on Friday showed. That rate of pay increase exceeds the pace of inflation, indicating that the spending power of workers has grown even as prices jump.
The data marks a boon for workers but could give pause to policymakers, since they fear that a rise in pay could prompt businesses to raise prices in order to cover the added labor cost.
“Today’s data undermines the message that other recent economic data have been giving of a cooling U.S. economy, and slams the door shut on a July rate cut,” Seema Shah, chief global strategist at Principal Asset Management, told ABC News in a statement.
The major stock indexes fell slightly in pre-market trading in response to the jobs report.
The United States economy has shown remarkable resilience in the face of the ongoing challenges posed by the COVID-19 pandemic. The latest jobs report, released by the Bureau of Labor Statistics, has exceeded expectations and provided a glimmer of hope for the nation’s economic recovery.
According to the report, the US economy added 943,000 jobs in July, far surpassing the 870,000 jobs that economists had predicted. This marks the second consecutive month of strong job growth, following the addition of 938,000 jobs in June. The unemployment rate also fell to 5.4%, down from 5.9% in June.
These positive numbers are a clear indication that the US economy is on the path to recovery after being hit hard by the pandemic. The job gains were widespread across various sectors, with notable increases in leisure and hospitality, professional and business services, and transportation and warehousing.
One of the most encouraging aspects of the jobs report is the increase in labor force participation. The number of people actively looking for work rose by 261,000 in July, indicating that more Americans are feeling confident about re-entering the job market. This is a positive sign that the economy is gaining momentum and that businesses are starting to hire again.
The strong jobs report has also had a positive impact on consumer confidence and spending. As more people return to work and receive steady paychecks, they are more likely to spend money on goods and services, which in turn stimulates economic growth. This increased consumer activity is crucial for businesses that have been struggling to stay afloat during the pandemic.
While the jobs report is certainly a cause for celebration, there are still challenges ahead for the US economy. The Delta variant of COVID-19 continues to spread rapidly, raising concerns about potential disruptions to economic activity. Additionally, there are ongoing supply chain issues and labor shortages that could hamper the recovery process.
Despite these challenges, the resilience demonstrated by the US economy in the face of adversity is truly remarkable. The strong jobs report is a testament to the hard work and determination of American workers and businesses, and it bodes well for a brighter economic future. With continued support from policymakers and a commitment to overcoming obstacles, the US economy is poised for a strong and sustainable recovery.
