US employers added more than double the number of jobs forecast, illustrating rock-solid labour demand that tempers recession worries and suggests the Federal Reserve will press on with steep interest-rate hikes to thwart inflation.
Non-farm payrolls jumped 528,000 in July, a broad advance that beat all estimates and was the largest in five months, US government data showed. Employment in the prior month was revised up to a 398,000 gain. The unemployment rate fell to 3.5pc, matching a five-decade low. Wage growth accelerated and the labour force participation rate eased.
The median estimates in a Bloomberg survey of economists called for a 250,000 payrolls gain and for the jobless rate to hold at 3.6pc.
The report suggests a voracious appetite for workers, particularly in the service sector that's been struggling with labour shortages. The gain in payrolls was broad, led by increases in accommodation and food services, health care and professional and business services.
The figures underscore both a job market ploughing ahead and relentless inflationary pressures. While the strong advance in payrolls and wages are welcome news for President Joe Biden, it's also likely to stiffen the Fed's resolve to stay on the path of large interest-rate increases.
Average hourly earnings also surprised to the upside, rising 0.5pc in July after an upwardly revised 0.4pc gain in the prior month. From a year earlier, earnings advanced 5.2pc for a second month. An elevated pace of earnings growth suggests inflationary pressures will persist, a concern for Fed policy makers.
"Certainly 75 basis points will be on the table for the next meeting," said Randall Kroszner, an economics professor at the University of Chicago Booth School of Business and a former governor at the central bank. "The thing is not only the strength of the labour market, but it is also the significant increase in wages higher than expected upward revisions."
Both payrolls and the unemployment rate have returned to their February 2020 pre-pandemic levels.
The labour force participation rate – the share of the population that is working or looking for work – fell to 62.1pc, the lowest this year and driven by a sharp drop among teenagers. The rate for workers ages 25-54, however, ticked higher.