The economy added 943,000 new jobs in July, the Bureau of Labor Statistics reported Friday, bringing the labor market recovery to its fastest pace in over a year. The unemployment rate fell by half of a percentage point to 5.4%.
The report beat forecasters’ expectations, which were for around 870,000 new nonfarm payroll jobs.
The details of the report suggested underlying momentum in the recovery. Revisions added 119,000 jobs to the previous two months’ tallies. Labor force participation and wages also rose.
“Things are undeniably moving in the right direction,” said Greg McBride, the chief financial analyst for Bankrate.com.
Nor did the surge in COVID-19 driven by the delta variant show much damage to employment. The leisure and hospitality industry, which was devastated by the pandemic early on, added 380,000 jobs in the month.
Friday’s report paints a picture of a labor market that is still badly wounded but now healing faster. Nearly 6 million fewer workers are employed than before the pandemic struck, suggesting that the recovery is nowhere near complete and that many sectors and parts of the country are still struggling with problems created by the virus.
At the same time, though, many employers are having difficulty finding workers. Many laid-off employees have switched careers during the pandemic. Others may be choosing not to work because they get paid more through the federal boost to unemployment benefits, a possibility that Republicans have highlighted as a problem created by Democratic policies. A number of GOP-led states have opted out of the benefits.
Labor supply constraints and other bottlenecks have helped drive up inflation to 5.4% in June, the fastest rate of price increases since 2008. Inflation fears have cut into ratings of President Joe Biden’s handling of the economy and complicated his plans for trillions more in spending.
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The Federal Reserve, though, has mostly brushed off the threat of rising inflation. Instead, it has maintained that the high rates seen in 2021 are due to one-off factors that will abate. To encourage spending, the central bank has kept its interest rate target at zero and continued buying huge amounts of government bonds each month. The Fed’s Vice Chairman Richard Clarida said Wednesday that the economy is likely to reach full employment in 2022 and begin raising its rate target in 2023.
