<mediadc-video-embed data-state="{"cms.site.owner":{"_ref":"00000161-3486-d333-a9e9-76c6fbf30000","_type":"00000161-3461-dd66-ab67-fd6b93390000"},"cms.content.publishDate":1659646637261,"cms.content.publishUser":{"_ref":"00000168-ed7d-d9d9-a9ec-ff7daffb0002","_type":"00000161-3461-dd66-ab67-fd6b933a0007"},"cms.content.updateDate":1659646637261,"cms.content.updateUser":{"_ref":"00000168-ed7d-d9d9-a9ec-ff7daffb0002","_type":"00000161-3461-dd66-ab67-fd6b933a0007"},"rawHtml":"
var _bp = _bp||[]; _bp.push({ "div": "Brid_59631233", "obj": {"id":"27789","width":"16","height":"9","video":"1067396"} }); ","_id":"00000182-6aa5-dd2e-a7df-ebbfed6e0000","_type":"2f5a8339-a89a-3738-9cd2-3ddf0c8da574"}”>Video EmbedThe economy defied expectations and added 528,000 jobs in July, an encouraging sign of the labor market’s resiliency that will allay fears the country is in a recession.
The unemployment rate fell to 3.5%, the Bureau of Labor Statistics reported Friday morning, tied for the lowest level in more than a half-century and matching its ultralow level prior to the pandemic. The jobless rate for Hispanic workers hit an all-time low of 3.9%.
JOBLESS CLAIMS TICK UP TO 260,000 AMID RECESSION FEARS
Friday’s report shows that the jobs market is red hot and will boost President Joe Biden, whose approval ratings have suffered as historic inflation cuts deeply into the paychecks of people across the country. It will allow him to make a strong case that the economy is not in recession since it is still providing job opportunities and wage gains for workers.
The strong job gains will also prompt the Federal Reserve to proceed more confidently with large interest rate hikes to curb inflation without fearing that the monetary policy tightening will spur layoffs.
“Most economists were way off, expecting a more pessimistic report,” Victor Claar, an economics professor at Florida Gulf Coast University, told the Washington Examiner. “This report will only increase the debate over whether we are in a recession since in a typical recession layoffs accompany the downturn in GDP.”
“This report will also embolden the Fed to continue its interest rate increases since the job market appears OK for now,” he added.
The encouraging jobs numbers stand in contrast to the latest statistics on GDP, which contracted in the first two quarters of the year, the first such back-to-back contractions since the Great Recession.
Two consecutive quarters of GDP decline are typically indicative of a recession, although the White House and some economists are pushing back on that notion and highlighting the still-strong labor market.
The National Bureau of Economic Research, which is regarded by the government and economists as the authority on declaring recessions, defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”
A concerning sign in Friday’s report, though, is evidence that wage gains are slipping further behind inflation. Average hourly earnings were up 5.2% for the year ending in June and were 0.5% in that month alone. Consumer prices are not expected to have slowed too significantly in July from June’s 9.1%, meaning that real purchasing power is falling off very quickly for many consumers.
Labor force participation remained nearly the same as the month before, at 62.1%.
Friday’s numbers come as the Federal Reserve keeps jacking up interest rates aggressively and tightening its monetary policy to combat explosive inflation. The central bank raised rates by half a percentage point in May and then took the even more aggressive step of hiking rates by three-fourths of a percentage point in June — the most ambitious upward hike since 1994.
The Fed then conducted another massive hike of 75 basis points following its July meeting, which means that the central bank has essentially hiked rates six times on a conventional basis in just the past two months alone.
The Fed’s action is designed to slow spending and eventually drive down prices, although it is becoming increasingly clear that the trade-off might be the economy tumbling into a recession.
Business fixed investment cratered at nearly a 4% rate in the second quarter, according to the preliminary estimate, a sign that the rising interest rates are taking a toll on investment and growth.
Republicans have begun saying that the economy is already in a recession, and some economists have said that is likely the case or that the economy is heading in that direction.
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
Still, Fed Chairman Jerome Powell has pushed back on the notion that the economy is now in a recession. Speaking after the Federal Open Market Committee decided to conduct another aggressive interest rate hike in July, Powell was asked about the state of the economy.
“I do not think the U.S. is currently in a recession,” Powell said. “And the reason is there are just too many areas of the economy that are performing too well.”
