This morning the Bureau of Labor Statistics (BLS) released its report on the Employment Situation for July 2022. The report showed that the labor market continues to expand rapidly despite fears that the economy is in a recession. The report found that the economy added 528,000 new jobs in July, and the unemployment rate declined to 3.5%. The growth in employment means that the economy has the same number of jobs as before the pandemic. The unemployment rate is now the same as the near-record low level in February 2020.
This significant increase in employment is surprising given recent declines in GDP and the declining number of job openings, which were down by over 600,000 to 10.7 million at the end of June. While the number of job openings is declining, it is still at a historically high level. The jobs level showed that the number of unemployed workers fell by 242,000 to 5.7 million – still nearly 1.9 open jobs per unemployed worker.
The continued decline in the unemployment rate is a strong signal that the economy is not in a recession. The question is if the labor market can remain resilient over the second half of the year as higher interest rates, meant to reduce inflation, start to significantly impact the economy. The risk is that this tightening will slow the economy and significantly increase unemployment. The data from the BLS this week is encouraging in that it shows that labor market conditions for workers measured by the number of jobs and unemployment rates can remain strong while the number of job openings falls toward more normal levels.
Here are a few other interesting notes from the report:
- The growth in jobs was broad-based, with increases in employment in nearly every sector of the economy, another signal of overall economic strength.
- The decline in unemployed workers accounts for about half of the employment gains this month. While the economy recovered all jobs lost during the pandemic, the employment to population ratio at 60% is still more than 1 percentage point below pre-pandemic levels. This means that the labor force still has room to grow if more people can be encouraged to return to the labor market.
- Average hourly earnings continued to rise, growing by 5.2 percent over the past 12 months. While this is rapid wage growth, it is currently not keeping up with inflation.
- The May and June jobs numbers were revised up by a combined 28,000 jobs. Together these reports show that the economy added an average of 437,000 jobs over the past three months.
