Hiring surged in July as U.S. economy exceeds expectations despite inflation, rate hikes

The U.S. has now regained all the jobs it lost during the COVID pandemic, in spite of concerns about rising inflation and a possible recession. Employers added 528,000 jobs last month, more than double what economists predicted. Meanwhile, unemployment fell to 3.5 percent, the lowest since the pandemic started. Washington Post columnist Catherine Rampell joins John Yang to discuss.

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  • Judy Woodruff:

    Once again, the U.S. labor market demonstrated last month that it is far more robust than many thought. Some economic indicators are showing signs of slowdowns, and yet a hiring boom remains at the strongest levels in many years, while the unemployment rate is at a five-decade low.

    John Yang gets some analysis of what's happening.

  • John Yang:

    Judy, the jobs report showed good news across the private sector, building on three months of steady employment gains. But the U.S. economy shrank in the first half of the year, and new home sales have fallen, and that is sparking fears of recession.

    So what is going on with the economy?

    Special correspondent Catherine Rampell is here to try to help us through that. She's a Washington Post columnist.

    Catherine, thanks so much for joining us.

    Let's focus first on today's jobs report and the jobs market. Why is this hiring, jobs creation so robust right now?

  • Catherine Rampell:

    Well, it looks like businesses are still in great demand for workers.

    In fact, the pace of job growth accelerated in July, contrary to a lot of economists' expectations. But, look, the last few months, we have seen about twice as many vacancies as there were unemployed workers available. And it looks like that demand for hiring is not letting up.

    As long as consumers keep spending, businesses still need workers. So they're scooping up as many as they can.

  • John Yang:

    Are there any things — underneath those sort of top-line numbers in this report, are there any signs of concern or that should be creating some concern?

  • Catherine Rampell:

    In general, it was a very strong report. Again, this was faster pace — a faster pace of hiring than we expected.

    And, in fact, we have now recovered all of the jobs lost at the very beginning of the pandemic. But there were some numbers that were a little bit concerning. For example, the numbers showed that the labor force participation rate declined.

    That means the share of people who were either working or looking for work went down. And that's a bit of a puzzle, given that the economy is very strong. As I said, there's huge demand for workers, much more demand than there is the number of workers available. Normally, that would be drawing more people into the labor force. And, instead, we're seeing the reverse.

    And another thing that might be somewhat worrying that's a little bit counterintuitive is that this jobs report was so robust, it shows that the economy is so hot, that it might encourage the Federal Reserve to actually, if not necessarily accelerate the pace of rate hikes, which it might, at least keep its foot firmly on the brake, meaning that, if they're worried about the economy overheating — and this report continues to show that the job market is strong, the job market is hot — that they might decide that they need to cool it down a little bit.

    And, as a result, you might see those rate hikes, which will be painful. So it it's kind of a good news/bad news story, you almost want a Goldilocks type of report that — where job growth is not so strong that it looks like we're overheating, not so weak that it looks like we're in recession. It's a steady pace. And we're more than a steady pace at this point.

  • John Yang:

    Well, help us with the — sort of the bigger picture.

    On the one hand, we did have the economy, as measured by gross domestic product, shrink in the first half of this year. On the other hand, you do have these robust job creation numbers. So is the bigger concern a recession, as evidenced by the GDP numbers, or, as you have just mentioned, an overheated economy?

  • Catherine Rampell:

    It's a really confusing picture right now. The economy is sending out a lot of mixed signals.

    Some numbers look great. The jobs numbers look great. GDP, as you pointed out, not so great. GDP shrank the first half of this year. The housing market not doing so well, consumer spending doing very well. So it's very hard to tell a coherent story about this economy right now.

    The best economists in the world are puzzling through the data and trying to make sense of this sort of cacophony of numbers, which — many of which contradict each other. And if you're the Federal Reserve, I think you're in a really challenging position right now to figure out, is the economy overheating or is it weakening?

    Because, if it's overheating, that suggests one course of action. That suggests higher rate hikes, faster rate hikes. If, in fact, it has a lot of underlying weakness, as some of those others numbers show, that suggests that maybe they shouldn't act so aggressively to tighten financial conditions.

    It's very puzzling right now. And it's hard to make sense of the data. I mean, one thing that may happen is that, a few months down the line, we will see some revisions. There are always lots of revisions to these numbers, probably especially more today, given what a weird economy we're in. And that may eventually tell us a more coherent story.

  • John Yang:

    Another puzzle — you mentioned the fact that there are more job openings than there are people looking for jobs. And yet you also have this job-hopping, part of the great job — the Great Resignation.

    Explain what's going on there.

  • Catherine Rampell:

    Well, there are a lot of opportunities right now for workers, some of which offer better pay, better benefits, better hours, et cetera.

    So, as long as the market is good, I think you see a lot of workers deciding to trade up, if they can.

  • John Yang:

    Special correspondent and Washington Post columnist Catherine Rampell, thank you very much.

  • Catherine Rampell:

    Thank you.

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