The numbers The US added a surprisingly strong 528,000 new jobs in July and the unemployment rate fell to pre-pandemic levels in a muscle-flexing display for the economy, but the robust report could add to inflation concerns and push interest rates even higher.
Economists polled by The Wall Street Journal had forecast 258,000 new jobs.
The unemployment rate slipped to 3.5% from 3.6%, the government said Fridaymatching the lowest rate since the late 1960s.
In premarket action, US stocks turned lower.
The large increase in hiring contradicts another key government report that suggests the US teeters on recession, but it won’t be viewed in a positive light by the Federal Reserve.
The Fed is sharply raising US interest rates to try to reverse the worst outbreak of inflation in almost 41 years. Higher rates slow the economy by raising the cost of borrowing for businesses and consumers.
The shockingly robust July jobs report could persuade the Fed that even tougher medicine is needed. The central bank worries the tight labor market is driving wages sharply higher and making it harder to get inflation under control.
Big picture: The economy has slowed as the Fed jacks up interest rates. Gross domestic product has fallen two quarters in a row, meeting an old rule of thumb for determining when a recession has taken place.
Yet the economy still rests on a solid foundation and that could keep a recession at bay. The US labor market is the biggest strong point.
Surveys show one of the thorniest problems for business is finding enough workers. They might be hesitant to lay off lots of employees even as the economy slows given how hard they are to find, insulating the US from a severe downturn.
The risks of recession are rising, however.
Market reaction: The Dow Jones Industrial Average DJIA,
and S&P 500 SPX,
were set to open slightly higher in Friday trades.
Credit: www.marketwatch.com /