The US hiring boom continued last month as employers added 528,000 jobs, more than double the number expected.
Government data showed a labor market that continues to challenge rising inflation and consecutive quarters of GDP contraction. which raised fears of a recession.
It marked the nineteenth consecutive month of wage expansion and will strengthen the arguments for the Federal Reserve to continue its aggressive tightening policy.
Like the Bank of England, the Fed has raised interest rates in an attempt to bring inflation back to its 2% target. In June it reached 9.1%.
Experts said it is now more likely to produce a third rate hike of 75 basis points at its next meeting in September, after raising the rate by three quarters of a percentage point last week.
The central bank has already raised rates by 2.25 percentage points this year.
The jobs figure rose from 398,000 in June, while the unemployment rate fell slightly to 3.5%, from 3.6% in June.
Demand for workers was lower in sectors such as housing and retail, which are more sensitive to rising interest rates, but airlines and restaurants were struggling to find enough workers.
Average hourly wages increased 0.5% in July after gaining 0.4% in June, which means an annual increase of 5.2% from 5.1% in June.
The rush to the dollar is bad for the pound
The news also had an effect on the currency markets: the rush to the dollar meant that the pound lost almost 1.5 cents.
Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago, told Reuters: “What we heard this week from the various Fed governors that it is too early to move away from tightening policy is certainly underway with the report on. ‘occupation which is “this hot”.
“It gives the Fed a reason to keep raising rates, and that’s what has put the market in turmoil.”
“Some difficulties in sight”
Hinesh Patel, portfolio manager at Quilter Investors, said: “Every single unemployment rate has fallen or remained at post-pandemic levels as the economy continues despite economic troubles on the horizon.
“Private paychecks are now above the pre-pandemic level as the US continues to emerge from COVID is a better state than many of its developed market counterparts.
“The Federal Reserve will see this as a sign that it must continue to rise aggressively to keep inflation in check and take some of the foam out of this tight job market.
“However, the most recent earnings season indicates some troubles ahead. Just recently, Walmart’s results, a good indicator of consumer confidence and the state of the US economy, started to sound the alarm bell.
“The US is a solid market, however, and much of the negativity, however, is driven by statistical oddities and the scourge of inflation. The future direction of the Federal Reserve, as we’ve all seen this year, will ultimately depend. from the path of inflation “.