WASHINGTON (Reuters) – The U.S. economy added far more jobs than expected in July and the unemployment rate fell to 3.5%, returning to its pre-COVID-19 pandemic level, shows on Friday the Labor Department’s monthly report, which offers the most compelling evidence yet that the world’s largest economy is not in recession.
This official report shows 528,000 non-farm payrolls last month, while economists and analysts polled by Reuters forecast an average of 250,000 with an unemployment rate unchanged at 3.6%.
The June figures have also been revised upwards and show 398,000 job creations instead of the 372,000 initially announced.
The report, as always eagerly awaited by the financial markets, paints a picture of a relatively solid economy despite two consecutive quarters of contraction in gross domestic product.
Demand for labor has fallen in sectors sensitive to changes in interest rates – such as housing and retail – but airlines and restaurants are struggling to hire.
This strong job growth could encourage the Federal Reserve (Fed) to raise rates by 75 basis points for a third time when it meets in September, although its decision depends largely on inflation data.
After rising three-quarters of a point last week, the US central bank has raised its key rate by a total of 225 basis points since the start of the year.
The US economy contracted 1.3% in the first half, largely due to sharp changes in inventories and the trade deficit.
The National Bureau of Economic Studies (NBER), an organization considered the “official arbiter of recessions” in the United States, defines a recession as “a significant decline in economic activity distributed throughout the economy, that lasts more than a few months, normally visible in production, employment, real income and other indicators”.
The labor market remains tight and economists do not expect a sharp deceleration in payroll growth this year.
The average hourly wage increased by 0.5%, after +0.4% (revised), and its increase over one year reached 5.2% as in June.
On Wall Street, futures contracts on the main indices went into the red and the dollar increased by 0.8% against a basket of international currencies after the publication of these figures.
On the bond side, the yields of Treasury bills rose, that of ten-year securities moving to 2.7828% against 2.697% ten minutes before the publication of the statistics.
(Report Lucia Mutikani, French version Laetitia Volga, edited by Jean-Stéphane Brosse)
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