And just like that, U.S. unemployment has recovered from its pandemic-induced doldrums. However, the labor market is still tight despite seeing significant job growth in July, according to the latest report from the U.S. Bureau of Labor Statistics (BLS).
Based on Friday’s BLS data, employers added 528,000 jobs in July—up from 372,000 in June. This mid-summer performance helped bring the national unemployment rate down to 3.5%, marking a total return to its February 2020 pre-pandemic levels.
The labor force participation rate, at 62.1%, and the employment-population ratio, at 60%, were little changed.
According to CNBC reports, the employment gains indicate a strong labor market despite signs of economic weakness in the face of elevated inflation and federal response to reel it in.
- The U.S. added 528,000 jobs last month.
- The average hourly earnings for all employees on private nonfarm payrolls rose by 15 cents (0.5%) to $32.27
- There were 5.67 million unemployed people in July 2022—down from 8.67 million in July 2021.
- Employment in leisure and hospitality grew by 96,000 jobs, with restaurants adding 74,000 and accommodation covering the remaining spread.
- Employment in professional and business services added 89,000 jobs.
- Manufacturing added 30,000 jobs in July, with employment in durable goods industries—including products used in homebuilding—up by 21,000.
- Employment in construction grew by 32,000 positions, as specialty trade contractors added 22,000 jobs.
- Jobs in construction were up 82,000 over February 2020.
“The 20 million jobs lost during the early months of the COVID-19 lockdown have been fully recovered,” said Lawrence Yun, chief economist for the National Association of REALTORS®. “More Americans are working today than at any time in history. The unemployment rate is 3.5%, matching a 50-year low. Companies have increased wages by 6.2%, though that figure is unable to keep up with 9% inflation. ‘Help Wanted’ signs abound.
“Part of the reason for the worker shortage is due to 3 million more people who aren’t looking for jobs today compared to the number of those looking in March 2020. Given the comeback in jobs, how are home sales? They are running below the pre-pandemic numbers seen in early 2020 and slightly below the 2019 annual total. Mortgage rates appear to be settling down over the past month at below 6%, with the past week dipping to 4.99%, but they are well above the 3.6% to 3.9% rates in the months before the pandemic. In other words, home sales are more impacted by mortgage rate changes than jobs. But the recently stabilizing mortgage rates suggest home sales will also soon stabilize and are likely to make steady gains in 2023,” Yun concluded.
“Mixed signals on the state of the economy continue as companies added an impressive 528,000 net new jobs in July in the wake of the announcement last week that GDP declined over the first two quarters of 2022,” said Joel Berner, senior economic research analyst at realtor.com®. “July’s job growth far surpassed the second quarter average of just under 375,000 jobs added month-to-month.
“Though recession fears have pervaded the national conversation, the total number of employed persons has reached 158.3 million, back to the pre-pandemic peak in February 2020. While rampant inflation and relative softness in the stock market over the calendar year have Americans concerned about their spending and savings, the economy continues to exhibit a strong pace of employment activity.
“The number of job openings has held steady, at around 11 million in the most recent releases of data, and the number of unemployed persons has as well, around 5.9 million. Opportunities are plenty, and the headline unemployment rate decreased to 3.5% as the labor force participation rate held steady at 62.1%, still below the pre-pandemic level of 63.4%. The job market continues to favor workers who are open to negotiating pay raises or seeking new positions, and average hourly wages ticked up by 15 cents to $32.27. Though this is a promising development for workers, 9.1% inflation means that the modest 5.2% year-over-year wage growth still leaves workers with a significant loss of purchasing power.
“With rent growing at double-digit paces year-over-year every month since August 2021, mortgage rates near or above 5% since April, and the asking price of homes for sale at an all-time high, the cost of housing is a major challenge for Americans today,” Berner concluded.
“Job growth in July remained strong, and with upward revisions to May and June, job growth has averaged 437,000 per month over the last three months,” said Mike Fratantoni, SVP and chief economist at the Mortgage Bankers Association. “Despite the negative reading on second quarter GDP, this is not a picture of an economy in recession. And even though initial claims for unemployment insurance have increased modestly in recent weeks, these data show that the pace of hiring, spurred by more than 10 million job openings, continues to exceed any increase in layoffs.
“The GDP and other recent data releases showed a shift in activity from goods-producing to service-providing sectors. This report matched that, showing much faster job growth in the services sector.
“Construction employment increased by 32,000 over the month. Although housing demand waned due to a spike in mortgage rates, builders continue to add supply to a market that needs it. With solid wage gains and a recent drop in rates, some buyers may return to the market.
“This remains one of the strongest job markets in the past 50 years, no comfort for those hoping for a slowdown, which would reduce inflation and lead to a less aggressive path of rate hikes from the Federal Reserve,” Fratantoni concluded.
To read the full report, click here.