People walk past a store in Washington, D.C., the United States, on May 11, 2022. (Xinhua/Liu Jie)
U.S. employers added a whopping 528,000 jobs in July, which showed that the labor market has now recovered all 22 million jobs lost due to COVID-19-related restrictions on businesses starting in 2020. However, economists are split over the economy's direction.
by Matthew Rusling
WASHINGTON, Aug. 5 (Xinhua) -- A surprisingly robust jobs report calls into question whether the United States is in a recession, amid some economists' gloom-and-doom predictions of a downturn.
U.S. employers added a whopping 528,000 jobs in July, according to Friday's Labor Department report, which showed that the labor market has now recovered all 22 million jobs lost due to COVID-19-related restrictions on businesses starting in 2020.
The jobless rate fell from 3.6 percent to 3.5 percent, matching 50-year record lows before the pandemic, which were reached during the administration of former President Donald Trump.
Economists had predicted the economy would add 250,000 jobs - less than half of what Friday's report revealed.
The number was a win for U.S. President Joe Biden, who has been dogged by record-low polling numbers and surging inflation.
"Today, the unemployment rate matches the lowest it's been in more than 50 years: 3.5 percent," Biden said in a statement Friday morning. "More people are working than at any point in American history."
The situation is unusual, as it comes amid surging inflation, shrinking gross domestic product (GDP), record low consumer confidence and a slowing economy.
The U.S. economy shrank at an annual rate of 0.9 percent in the second quarter after a 1.6-percent contraction in the previous quarter, the U.S. Commerce Department reported in an "advance" estimate last week. That satisfies the technical definition of a recession.
Tourists walk on the National Mall in Washington, D.C., the United States, on July 24, 2022. (Photo by Aaron Schwartz/Xinhua)
But people are still spending and traveling, and Friday's robust jobs report is the latest evidence supporting some economists' argument that the economy is not yet in a recession.
"Broadly speaking, the economic data are sending mixed messages at present, and the white-hot payroll numbers look increasingly out-of-line with other data points," Sarah House and Michael Pugliese, economists at Wells Fargo Securities, wrote in an analysis.
Economists are split over the economy's direction.
"The economy is clearly very strong and wages are growing rapidly. That is inconsistent with shrinking GDP. I expect upward revisions," Dean Baker, senior economist at the Center for Economic and Policy Research, told Xinhua.
But others remain wary.
Brookings Institution Senior Fellow Barry Bosworth told Xinhua: "The future direction of the economy remains very uncertain."
The report is "good for jobs, but not for the FRB," Bosworth said, referring to the Federal Reserve Board.
"It should raise expectations of further rate increases," Bosworth said.
Echoing his view, House and Pugliese noted that employment growth of more than half a million jobs a month and a falling unemployment rate will give the Fed the confidence it needs to "push ahead aggressively with its fight against inflation."
"At least a 50 bps rate hike at the September 20-21 FOMC (Federal Open Market Committee) meeting seems likely at this point in time," they said, adding that another 75-basis-point hike "could be in store" if inflation over the next two consumer price index reports shows no signs of trending lower.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, the United States, June 16, 2022. (Photo by Michael Nagle/Xinhua)
Markets fell on the monthly jobs report at the start of trading Friday before breaking even by day's end.
The Dow Jones Industrial Average dropped before recouping its losses by day's end. The Nasdaq subsided a moderate 0.50 percent by the end of trading Friday.
Investors fear a booming jobs sector could spur more inflation, which stands at a 40-year high. That in turn could prompt the Fed to continue to hike interest rates, which could slow the economy and hurt the labor market.
Even Fed Chair Jerome Powell recently said that the process to bring down inflation would likely involve a period of below-trend economic growth and "some softening in labor market conditions."
The jobs report, however, is a silver lining in Democrats' dark cloud, as Biden's approval rating stands near record lows at 39.5 percent, according to the RealClearPolitics' polling average.
Inflation shows signs of easing. Despite a strong jobs sector, millions of Americans are still feeling the pain of record prices of food and gasoline.
All this could result in a Republican wave in November's midterm elections, many experts contend.
Brookings Institution Senior Fellow Darrell West told Xinhua the jobs report "suggests the economy may be stronger than generally thought, which would help Democrats considerably in November if that good news holds up."
"There is a strong tie between the economy and voting so the stronger the economy, the better Democrats will fare," said West.
Christopher Galdieri, assistant professor at the Saint Anselm College, told Xinhua: "More jobs and lower unemployment is always good news for presidents. The question this year is if that's enough to offset high inflation in the minds of voters."
"President Biden has had a number of legislative wins lately ... but that hasn't done much to boost his approval ratings. Democrats are likely going to hope voters see this as a reason to keep them in power," Galdieri said. ■