US employers add 372,000 strong jobs in sign of resilience

WASHINGTON (AP) — U.S. employers shrugged off high inflation and weakening growth to add 372,000 jobs in June, a surprisingly strong gain that will likely prompt the Federal Reserve to keep raising interest rates to cool the economy. economy and curb price increases.

The jobless rate stood at 3.6% for the fourth consecutive month, the government said on Friday, matching a nearly 50-year low that was reached before the pandemic struck in early 2020.

The steady and strong pace of hiring shows that many companies still want to add workers to meet high customer demand, a trend that should allay concerns that the US economy could be on the brink of a recession. With the nation gaining many additional jobs, more Americans are earning paychecks and able to spend despite the highest inflation in four decades.

Last year’s hiring spree has contributed to inflation and increased pressure on the Fed to cut borrowing and spending. The central bank has already embarked on its fastest series of rate hikes since the 1980s. Further large rate hikes would make borrowing much more expensive for consumers and businesses and increase the risk of a recession. during the next year.

The Fed may view June’s job creation as evidence that the rapid pace of hiring is further fueling inflation, as companies raise wages to attract workers and then raise prices to cover their higher labor costs. . Many employers still struggle to fill jobs, especially in the vast service sector of the economy, and Americans now travel, eat out and attend public events much more frequently.

Numerous sectors of the economy posted strong job gains in June: health care added 78,000, transportation and warehousing 36,000 and professional services, a category that includes accounting, engineering and legal services, gained 74,000.

Wages continued to grow in June, albeit at a slightly slower pace than earlier this year. More modest wage increases could help moderate inflation. Average hourly wages rose 5.1% to just over $32 last month, a much larger increase than before the pandemic, though not enough to keep pace with inflation. Wage growth has slowed from a 6% pace at the end of last year.

The persistent desire of many companies to hire and grow provides a bulwark against the likelihood of the economy slipping into recession. Even if a recession occurs over the next year, last year’s healthy job and wage growth could help keep it relatively short and mild.

For now, there are about two job openings posted for every unemployed worker. And the number of people seeking unemployment benefits, a leading indicator of layoffs and an early indicator of a recession, remains well below historical averages, though it has risen recently.

At the same time, economic growth has likely been negative for two consecutive quarters, consumers are cutting back with inflation at its highest level in four decades, and home sales have fallen as the Federal Reserve has raised loan costs.

And contracting could weaken in the coming months as the Fed’s rate cuts increasingly take effect. The Biden administration has also tried to cast any hiring pushback as part of a welcome transition to a more sustainable economy that will help keep inflation low.

However, the transition to a more sustainable pace of growth and hiring is likely to be bumpy. Signs of a slowdown are already evident. In May, consumer spending, adjusted for inflation, fell for the first time since December. Existing home sales are down nearly 9% from a year ago.

And some companies are announcing layoffs or have paused hiring. In particular, several large retailers, including Walmart and Amazon, have said they overhired during the pandemic, with Walmart reducing its headcount due to attrition.

Tesla is cutting about 3.5% of its total workforce. Netflix has laid off some 450 employees after it reported losing subscribers for the first time in more than a decade. Online car retailer Carvana and real estate companies Redfin and Compass have also announced job cuts.

Fed Chairman Jerome Powell has held out hope the economy will continue to expand even as the central bank raises borrowing costs at its fastest pace since the late 1980s. But Powell has also acknowledged that factors Foreigners, such as the Russian invasion of Ukraine, which has raised gasoline and food prices, will make it harder to avoid a recession.

Last month, he admitted that a recession “is not our intended outcome, but it is certainly a possibility.”

The recovery of the labor market has been much faster after the pandemic recession than in previous recessions. The economy has now regained all the private sector jobs lost to the pandemic, just over two years after the recession. It took nearly five years to reach that level after the 2008-2009 recession.

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