The hiring boom in the US continued last month, as employers added 528,000 jobs – more than double the expected number.
Government data shows a continuing labor market despite rising inflation and consecutive quarters of GDP contraction, This has raised fears of a recession.
It marks the 19th consecutive month of payroll expansion and will spur the Federal Reserve to continue aggressive policy tightening.
Like the Bank of England, the Fed has raised interest rates in an attempt to pull inflation back to its 2% target. In June, it reached 9.1%.
Experts say it is now more likely to deliver a third 75-point interest rate hike at the next meeting in September, after raising rates by three-quarters of a percentage point last week.
The central bank has raised interest rates by 2.25 percentage points this year.
The employment figure rose from 398,000 in June, while the unemployment rate fell slightly to 3.5%, from 3.6% in June.
Demand for workers is lower in sectors like housing and retail – which are more sensitive to rising interest rates – but airlines and restaurants are struggling to find enough workers.
Average hourly earnings rose 0.5% in July after rising 0.4% in June, representing a 5.2% year-on-year increase from 5.1% in June.
Rush to the dollar hurts the pound
The news also had an effect on currency markets – the rush to the dollar meant the pound lost almost 1.5 cents.
Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago, told Reuters: “What we’ve heard from various Fed governors this week is that it’s too early to turn away from tightening policy. definitely come out with this ‘hot job’ report.
“It gives the Fed a reason to keep raising rates, and that’s what drives the market.”
‘Some difficulties ahead’
“Every unemployment rate is down or at post-pandemic levels as the economy continues to grow despite the looming economic difficulties,” said Hinesh Patel, portfolio manager at Quilter Investors.
“Private payrolls are now above pre-pandemic levels as the US continues to emerge from COVID in a better state than many of its developed market counterparts.
“The Federal Reserve will take this as a sign that they need to keep going strong to keep inflation under control and remove some of the frost from this tight labor market.
“However, the most recent earnings season showed some difficulties ahead. Only recently did Walmart’s results, a good indicator of consumer confidence and the state of the US economy, start to pick up. alarm bells ringing.
“Despite this, the US is a strong market and much of the negative is being driven by statistical quirks and the scourge of inflation. The future direction of the Federal Reserve, as we have seen. this year, will ultimately depend on the path of inflation.”