Hiring in July was far better than expected, defying signs that the economic recovery is losing steam, the Bureau of Labor Statistics reported Friday.
Nonfarm payrolls rose 528,000 for the month and the unemployment rate was 3.5%, easily topping the Dow Jones estimates of 258,000 and 3.6% respectively.
Wage growth also surged higher, as average hourly earnings jumped 0.5% for the month and 5.2% from the same time a year ago. Those numbers add fuel to an inflation picture that already has consumer prices rising at their fastest rate since the early 1980s.
There is no evidence of a wage-price spiral. Employers are paying higher wages to attract workers because of a labor shortage, not because employees enjoy bargaining power vis-à-vis employers, e.g., union contracts as in the 1970s.
Leisure and hospitality led the way in job gains with 96,000, followed by professional and business services with 89,000. Health care added 70,000 and government payrolls grew 57,000. Goods-producing industries also posted solid gains, with construction up 32,000 and manufacturing adding 30,000.
Despite downbeat expectations, the July gains were the best since February and well ahead of the 388,000 average job gain over the past four months. The BLS release noted that total nonfarm payroll employment has increased by 22 million since the April 2020 low when most of the U.S. economy shut down to deal with the Covid pandemic.
The bureau noted that private payrolls are now higher than the February 2020 level, just before the pandemic declaration, though government jobs are still lagging.
Naturally Wall Street hated this good news for American workers. All Wall Street cares about is the cost of borrowing money. For years after the Great Recession of 2008-09, the FED has kept the cost of borrowing money at or near zero (it was even in negative rates for a time). Wall Street loves free money.
But now that the economy has inflation because of corporate mismanagement of supply chains (globalism, just-in-time delivery practices with a minimum of inventory), and price gouging and profiteering off of the short supply their practices created during a global pandemic, the FED is raising interest rates to deal with inflation, the only monetary tool it has. Wall Street no longer has access to free money.
Stock futures fell Friday after the July jobs report was much better than expected, showing a strong labor market that will likely mean more interest rate hikes from the Federal Reserve.
Futures on the Dow Jones Industrial Average slipped 222 points or 0.68%. S&P 500 futures lost 1.05% and Nasdaq 100 futures shed 1.43%.
Job growth was expected to slow as the Fed continues to hike interest rates to tame surging inflation, but this report shows a labor market still running hot. The report is a crucial one as it’s one of two the central bank will see before it decides how much to raise rates at its September meeting.
Just to be clear, Wall Street was cheeering for higher unemployment, which would be a sign of recession.
“This number is extraordinary. We’re a growth country. The rest of the world is not,” said Jim Cramer on CNBC’s “Squawk Box” after the strong report.
But Cramer cautioned about what it means for stock prices and explained why we are seeing the negative reaction in the futures.
“It means that obviously when they (the Fed) come back it stays hot they will do another three-quarters,” Cramer said. “That’s not what we thought. Remember we kind of bought this market on the idea that they are at 50 (basis points).“
After increasing rates by 0.75 percentage point for a second straight time last week, the central bank will next meet to decide on interest rates in September. Traders hoped they would slow the pace to a half point hike at that meeting. The S&P 500 is up 8% in the past one month through Thursday’s close.
Once again, all Wall Street cares about is the cost of borrowing money. The investor class aka the predator class, is all about maximizing its profits, it wants access to free money, and they do not give a damn about the consequences to average working Americans.
In an earlier post I pointed out that the economic data suggests that we may have reached peak inflation in early June, and inflationary pressures are starting to subside. For example, Gas Prices Have Fallen for 50 Straight Days, Approach $4 a Gallon:
U.S. gas prices have fallen for seven straight weeks and are approaching an average price of $4 a gallon, easing the pain of record-high fuel costs amid shrinking global demand for oil.
The average cost of a gallon of regular unleaded gasoline sank to $4.16 Wednesday, the 50th straight day that prices have declined, according to OPIS, an energy-data and analytics provider. That is a 17% decline from the previous high of $5.02 a gallon set back on June 14, according to OPIS.
The Circle K down the street from my house is selling gas for $3.99 gallon. If the trend in falling gas prices continues, we could see a decline of another dollar a gallon over the next several weeks.
That’s called disinflation.
We could get inflation under control and still have a growing economy without a recession.
But Wall Street will not be able to borrow free money, so we are all supposed to have a sad that the investor class has to pay interest to borrow money.
How out of touch with average Americans are these people? Average Americans have a mortgage payment on their house, and a car payment, if they can afford to buy a car. They also have credit card payments for all the things they are struggling to pay for because of corporate price gouging and profiteering.
Shed no tears for the predator class.
Huge jobs report. W/revisions more than 550,000. It's a boom not a recession.
Here's our monthly economic thread:
16 yrs Clinton Obama = 33.8m jobs
18 months Biden = 9.6m jobs
16 yrs Bushes Trump = 1.9m jobs
5 times as many Biden jobs as last 3 GOPers COMBINED. 5x. 1/ pic.twitter.com/jdO4TBh0So
— Simon Rosenberg (@SimonWDC) August 5, 2022