Why it’s too early to celebrate the July jobs report

Data: Bureau of Labor Statistics, FRED; Graphic: Axios Visuals

July United States. The jobs report was a blockbuster, but there is still room for improvement in the job market and the recent spike in COVID-19 cases means it’s too early to celebrate.

Why is this important: The US economy continues to show great momentum, putting more pressure on the Federal Reserve to ease its emergency monetary policies. However, doing it too soon risks dragging the economy down.

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In numbers : Employers added 943,000 jobs in July, which was considerably better than the 850,000 economists expected.

  • The figures for June and May have been revised upwards to a total of 119,000 jobs.

  • Notably, the unemployment rate fell to a low of 5.4% during a pandemic, from 5.9% in June.

Yes, but: While the labor force participation rate climbed to 61.7% in July from 61.6% in June, it remains well below the pre-pandemic level of 63.3%.

What they say : “The effects of the pandemic are still in play,” Anu Gaggar, global investment strategist for Commonwealth Financial Network, told Axios.

  • According to the Census Household Pulse Survey, 2.8 million Americans said they were not working because they were “worried about contracting or spreading the virus.” These people would increase the participation rate by one percentage point if they re-enter the workforce.

Threat level: Economist Justin Wolfers Noted that the July jobs report was based on a survey that reflects decisions made before the recent increase in COVID-19 cases.

  • Oxford Economics Chief Financial Economist Kathy Bostjancic said: “The highly contagious delta variant casts a shadow over the labor market recovery in the coming months, threatening to slow the return of workers still on the sidelines due to child care or health issues. “

The bottom line: The July jobs report clearly shows that the US economy was on a good track. But it remains to be seen exactly how the new wave of infections affects activity.

  • In light of this, it will be important to closely monitor future employment reports for any signs of a slowing labor market recovery, writes Bank of America economist Joseph Song in a note from research.

  • “It will be critical for the Federal Reserve – [the jobs] report leaves September in play for a reduction announcement, but subject to another very solid employment report next month, ”Song said.

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