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The numbers The U.S. added a surprisingly strong 528,000 new jobs in July and the unemployment rate fell in a muscle-flexing display for the economy, but the robust employment report could add to inflation worries and push interest rates even higher.
Economists polled by The Wall Street Journal had forecast 258,000 new jobs.
The unemployment rate slipped to 3.5% from 3.6%, the government said Friday, returning to pre-pandemic levels and matching the lowest rate since the late 1960s.
In premarket action, U.S. stock markets rose.
The large increase in hiring contradicts another key government report that suggests the U.S. teeters on recession, but it’s unlikely to be viewed in a positive light by the Federal Reserve.
The Fed is sharply raising U.S. interest rates to try to reverse the worst outbreak of inflation in almost 41 years. Higher rates tend to slow the economy by raising the cost of borrowing for businesses and consumers.
The sturdy July jobs report could persuade the Fed that even tougher medicine is needed. The central bank worries the tight labor market is driving wages sharply higher and making it harder to get inflation under control.
Big picture: The economy has slowed as the Fed jacks up interest rates. Gross domestic product has fallen two quarters in a row, meeting an old rule of thumb for determining when a recession has taken place.
Yet the economy still rests on a solid foundation and that could keep a recession at bay. The U.S. labor market is the biggest strong point.
Surveys show one of the thorniest problems for business is finding enough workers. They might be hesitant to lay off lots of employees even as the economy slows given how hard they are to find, insulating the U.S. from a severe downturn.
The risks of recession are rising, however.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
were set to open slightly higher in Friday trades.
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