The U.S. economy continued to generate strong employment growth in July, despite signs of a cooling economy and the Federal Reserve’s efforts to control inflation. According to the Labor Department, American employers added 187,000 jobs last month, marking 31 consecutive months of growth. The unemployment rate fell to 3.5 percent, which is near a record low.
Although revised figures for the previous two months indicated a definite deceleration in the economy, the report shows that job opportunities are still available for those seeking employment, which is putting upward pressure on wages. Average hourly earnings increased by 4.4 percent year-over-year, slightly more than expected.
Economists believe that the labor market is moving towards a more sustainable pace, suggesting that the gradual rebalancing of the labor market explains why some tightness is still being observed. Overall economic growth has remained robust in recent months, further reducing the likelihood of a significant downturn. Some banks on Wall Street and even the Federal Reserve’s staff economists have revised their recession forecasts for this year, indicating optimism that inflation will stabilize without causing major disruptions to workers and businesses.
The employment growth currently observed is primarily concentrated in sectors such as healthcare, which added 63,000 jobs in July, and leisure and hospitality, which experienced a slowdown in job growth due to the lingering effects of the pandemic. However, most other industries experienced stagnant or negative growth, including manufacturing and transportation and warehousing.
Despite a recent economic slowdown, companies have not cut payrolls drastically, and even the job losses have been limited to sectors such as temporary help services, which had experienced significant growth earlier this year. Corporate leaders have taken measures to retain their workforce, and some are exploring alternative projects or activities to keep employees busy during slow periods.
Analysts have observed that the economy has experienced a series of rolling recessions, with different parts of the country facing varying degrees of economic challenges. However, overall employment levels have not only recovered but are approaching pre-pandemic trajectories. Factors such as an increase in labor force participation among prime working-age individuals and an influx of immigrants have contributed to the resilience of the labor market.
While risks and uncertainties persist, such as impending student loan payments, vacant commercial office buildings, and defaults on risky loans, most forecasters anticipate modest monthly increases in employment or even declines towards the end of 2023. This gradual adjustment is expected to bring inflation back to the Federal Reserve’s target rate of 2 percent. Nonetheless, optimistic workers remain confident that they would quickly find new job opportunities if they were to lose their current positions.
In conclusion, despite the economic slowdown, the U.S. job market continues to show resilience and growth. While challenges and uncertainties persist, the overall employment outlook remains positive.
Jeanna Smialek and Ben Casselman contributed reporting.
