(NovaPoint) Despite slower economic growth and high inflation, one bright spot in the economy year-to-date has been the labor market. The employment report for July showed 528,000 net new jobs created. Job growth was led by Leisure and Hospitality with 96,000 new jobs, followed by Professional and Business Services with 89,000, and Health Care with 70,000. The unemployment rate is now 3.5%, back to its pre-pandemic levels.
Average hourly earnings rose by 0.5% to $32.27. Over the past 12 months, average hourly earnings have increased by 5.2%. While jobs have returned to their pre-pandemic level, the labor force participation rate of 62.1%, or the percentage of the working age population either working or looking for work, remains below its pre-pandemic level of 63.4%.
Strength in the labor market allows the Federal Reserve to continuing tightening monetary policy to reduce inflation. After the employment report was released, Federal Reserve governor Michelle Bowman commented that she supported similar sized rate increases (to the recent 0.75% increase) until inflation meaningfully declines. Between now and the Federal Reserve’s meeting on September 20th and 21st, we will have two months of CPI and PPI data (July and August), one month of Personal Consumption Expenditures (PCE) Price Index (July), as well as one more employment report (August) to help shape the Fed’s data-driven decision making on monetary policy.
