The US economy unexpectedly added 528,000 jobs last month and the unemployment rate returned to a half-century low, easing recession concerns while the labor market remained upbeat despite high inflation, tighter monetary policy and less fiscal support.
The data showed the pace of job creation accelerated compared to June, when the economy added 398,000 jobs, and more than double the 250,000 jobs economists had expected.
The unemployment rate fell from 3.6 percent to 3.5 percent, hitting its half-century low just before the start of the COVID-19 pandemic in 2020.
The meaning of the figures released on Friday US labor market It has taken back all the jobs lost since the start of the pandemic in February 2020 and will address concerns of a slowdown in the world’s largest economy just months before a midterm election that will determine Congress’s control. They can also encourage federal Reserve Continuing the rapid tightening of monetary policy to rein in rising prices.
Treasury yields jumped in response to the report, while the S&P 500 was down 0.4 percent in Friday lunchtime trading on Wall Street, as market participants bet the Fed would act more aggressively to tame inflation.
The yield on the two-year Treasury, which aligns with interest rate expectations, rose 0.21 percentage points to a two-week high of 3.25 per cent. The 10-year Treasury yield rose 0.17 per cent to 2.84 per cent.
The move raised the limit on yields on two-year treasuries to exceed that of 10-year notes. This so-called inversion of the yield curve is usually regarded as an indicator of an impending economic contraction. Following the report, the spread was at its most inverted level since August 2000.
In the futures market, traders began pricing in the prospect of a large rate hike at the Fed’s meeting in September. It is now expected that interest rates will rise above 3.6 per cent by the end of 2022, up from 3.4 per cent before the release of the report.
Pimco economist Tiffany Wilding said the new jobs data would prompt the Fed to raise by 0.75 percentage points for a third consecutive meeting in September and also bolster their hopes of additional tightening in 2023 to 2022.
“This is clearly a story of wage inflation across sectors, which is a worrying sign that inflation will remain stable, even as energy and food prices are falling. It all concerns Fed officials,” she said.
In a statement, President Joe Biden called the report evidence that his economic policies were working, even as polls show most Americans refuse to handle the economy.
“There are more people working than at any time in American history . . . and this is the result of my economic plan to build the economy from bottom to top and middle to out,” he said.
GDP data released last week showed for the second time in a row trimester contractions In US production, raising concerns of weakness in the economy. Economists at the National Bureau of Economic Research – what constitutes a recession in the US – haven’t said whether a recession is underway, but any major drop in job creation could raise those concerns.
Senior officials in the Biden administration have dismissed concerns that the US is in recession, saying the economy is in good shape and in a slow transition following last year’s boom.
Fed Chairman Jay Powell has cautioned against reading too much into GDP figures, saying he still thinks interest rates could rise further without a painful slowdown. But he warned that the road to that outcome was getting “narrower”.
On Thursday, the US Department of Labor separately released data It shows the number of people applying for unemployment benefits reached 260,000 last week, its highest level in more than six months, raising alarm bells about the direction of the jobs market.
“We’re not in a recession right now. Is the risk of a recession rising? Yes,” Cleveland Fed Chair Loretta Meester said Thursday at an event in Pittsburgh. She said she expects interest rates in the US to need to rise to “a little above 4”. [per cent]”To control inflation.