US companies added more than double the number of jobs forecast for July, revealing strong labor demand that tempered recession fears and suggested the Federal Reserve will continue to use steep interest rate hikes to combat out-of-control inflation.
Non-farm payrolls leapt by 528,000 jobs in July, an amount that beat all estimates and was the most in five months. Unemployment fell to 3.5%, matching a 50-year low.
The latest data reveals several job-opening areas in the service sector that have been struggling with labor shortages. Accommodations, food services, healthcare and professional services showed high numbers of vacancies.
Average hourly earnings, surprisingly for many economists, rose 0.5%, beating the expected figure of 0.4%. Average earnings have grown 5.2% since this time last year. An elevated pace of earnings growth suggests inflationary pressures will persist, which is still a concern for Fed policy makers.
What does this mean for me?
The promising data gives the US Fed reasons to continue its aggressive monetary policy approach. Fed Chairman Jerome Powell last week entertained the possibility that officials could raise rates by 75 basis points for a third time at their next meeting in September.
Analysts expect that as tighter monetary policy bites, the labor market is likely to slow in the coming months. For now, it remains buoyant, calming recession fears. Market watchers around the world will be encouraged by this latest data because the US holds a key role in staving off a global recession.