The American workforce expanded more swiftly than expected last month as the recovery of the world’s largest economy gathered pace.
Employers in the United States added 943,000 jobs in July, according to official data, patching up the country’s labour market despite an acceleration in Covid-19 cases.
Restaurants and bars are hiring hundreds of thousands of people; more than a third of the roles created were in the leisure and hospitality sectors.
The headline unemployment rate fell from 5.9 per cent to 5.4 per cent, its lowest level since the pandemic began last spring.
So-called non-farm payrolls have risen by 16.7 million since last April, but remain 5.7 million off their pre-pandemic level. The monthly non-farm payroll data is widely seen as the most important indicator of how the US economy is performing. It shows how many staff were hired or fired in any month by private employers other than farms, which are excluded because of seasonal variations.
Advertisement
Yesterday’s report outlined another month of robust employment growth, with 938,000 jobs added in June. However, companies in some sectors, from fast-food chains to hotels, have struggled to fill vacancies.
The Federal Reserve, which has faced calls to cut back its vast stimulus programme, is watching closely. Jerome Powell, its chairman, made clear last week that he wanted to see “strong job numbers” before taking action.
Policymakers have kept interest rates close to zero and have maintained a $120 billion-per-month asset-purchasing scheme. Critics say that the economy risks overheating, with inflation rising at its fastest pace in years, should the Fed fail to move. Powell insists that the present price growth is transitory.
Andrew Hunter, at Capital Economics, the consultancy, said that strong employment data “leaves open the possibility” of Powell indicating at the Jackson Hole symposium in Wyoming this month that “tapering” — or slowing down the asset purchasing scheme — is on the way.
“We had thought that continued slow progress on the employment recovery would see the Fed hold off tapering its asset purchases until early next year,” he said, conceding that “the risks may now be tilted towards that process beginning sooner than we had expected”.
Advertisement
James McCann, at Aberdeen Standard Investments, said: “This report is really going to cement the view that the Fed is not far off giving advance notice of a tapering announcement. Powell may well use the meeting of central bank policymakers in Jackson Hole to provide further hints, but he has made clear that these jobs reports are a cornerstone in the Fed’s thinking on tightening policy.”
The report was seized upon by investors on Wall Street, sending the Dow Jones industrial average and the more widely followed S&P 500 indices to record highs. The Dow added 144.26 points, or 0.4 per cent, to close at 35,208.51, while the S&P completed a week of records with another one, rising 7.42 points, 0.2 per cent, to 4,436.52.
