• Nonfarm payrolls employment grew by 528,000 in July

• Upward revisions added 28,000 jobs from the two prior months

• Unemployed rate back to its pre-pandemic level at 3.5%

• Average hourly earnings rose by 0.5% MoM, 5.2% YoY in July

• Labor force participation slipped to 62.1%

• July jobs report squashes current recession fears

Hiring in July was far better than expected, defying multiple other signs that the economic recovery is losing steam. The US added a sizzling 528,000 new jobs in July and the unemployment rate fell to pre-pandemic levels of 3.5% in a muscle-flexing display for the economy. The change in total nonfarm payroll employment for May was revised up by 2,000, from 384,000 to 386,000, and the change for June was revised up by 26,000, from 372,000 to 398,000. With these revisions, employment in May and June combined is 28,000 higher than previously reported. Total nonfarm employment has increased by 22.0mn since reaching a low in April 2020 and has returned to its pre-pandemic level. Private-sector employment is 629,000 higher than in February 2020, although several sectors have yet to recover. Government employment is 597,000 lower than its pre-pandemic level.

Hiring was broad-based as businesses created new jobs the most in five months. The number of people working finally returned to February 2020 levels - the last month before the pandemic. Leisure and hospitality led the way in job gains with 96,000, though the industry is still 1.2mn workers shy of its pre-pandemic level. Professional businesses created 89,000 jobs, health-care employment rose by 70,000 and government payrolls increased by 57,000. Manufacturers also added 30,000 jobs while construction firms hired 32,000 people. Retail jobs increased by 22,000.

The unemployment rate declined by a tenth of a percentage point to 3.5%, returning to its pre-pandemic level. Based on the household survey, employment was up 179,000, while the labor force fell by 63,000. As a result, the participation rate fell by a 0.1ppt to 62.1%. Average hourly earnings rose by 0.5% MoM. On a YoY basis, wage growth held steady at 5.2%.

Source: BIMB Securities Research - 8 Aug 2022