News Alert: Labor Market Data Puts to Bed Fears of Recession

News Alert: Labor Market Data Puts to Bed Fears of Recession

August 5, 2022

The U.S. economy added 528,000 jobs in July. Revisions to the prior two months were also positive, adding 28,000 jobs from previously reported May/June figures. U.S. payrolls have now surpassed their pre-pandemic level.?Employment gains were again widespread. The unemployment rate declined by a tenth of a percentage point to 3.5% – returning to its pre-pandemic level. The participation rate fell by 0.1pp to 62.1%.

This morning's report should ease fears that the U.S. economy is in a recession. While payrolls had been showing some signs of slowing in recent months, July data shows a complete reversal in that trend.?

It's important to note that these gains are most likely not sustainable. The participation rate has moved sideways this year, implying the lack of labor supply will soon be a binding constraint on hiring.??

With the FOMC dropping its forward guidance and moving to a data dependent assessment, today's report will most likely do nothing to dissuade policymakers from further tightening monetary policy in the months ahead.??