U.S. unemployment edges down to 3.5 pct in July despite recession fears

U.S. employers added 528,000 jobs in July despite recession fears, with the unemployment rate edging down to the pre-pandemic level of 3.5 percent, the U.S. Labor Department reported on Friday.

Job growth was widespread, led by gains in leisure and hospitality, professional and business services, and health care, according to the report released by the department’s Bureau of Labor Statistics (BLS).

The July employment report showed that the labor force participation rate slightly dropped to 62.1 percent, still below the pre-pandemic level of 63.4 percent.

The number of persons not in the labor force who currently want a job was 5.9 million in July, little changed over the month. This measure is above its February 2020 level of 5.0 million.

In July, 2.2 million persons reported that they had been unable to work because their employer closed down or lost business due to the pandemic, up from 2.1 million people in June. The figure was 1.8 million in May.

Average hourly earnings for all employees on private nonfarm payrolls rose by 15 cents, or 0.5 percent, to 32.27 U.S. dollars in July, the BLS report showed. Over the past 12 months, average hourly earnings have increased by 5.2 percent.

The Labor Department reported Tuesday that the number of job openings fell sharply by 605,000 to 10.7 million by the end of June, indicating weaker labor market demand as the Federal Reserve raises interest rates.

Even with the sharp decline in job openings, there were still approximately 1.8 job positions per available worker, signaling continued labor market tightness.

As the Federal Reserve ramps up its fight against surging inflation, the strong job market may be about to take a turn for the worse.

Fed Chair Jerome Powell said last week that the process to bring down inflation would likely involve a period of below-trend economic growth and “some softening in labor market conditions.”

“But such outcomes are likely necessary to restore price stability and to set the stage for achieving maximum employment and stable prices over the longer-run,” said Powell.