U.S. employers hired more workers than expected last month as a number of states ended extended unemployment benefits before the September expiration.
Nonfarm payrolls increased by 943,000 workers in July as the unemployment rate fell to 5.4%, the Labor Department said Friday. Analysts surveyed by Refintiv were expecting 870,000 jobs gained and the unemployment rate to fall to 5.7% from 5.9%. June’s reading was revised higher by 88,000 jobs to 938,000.
"Although there have been some cracks in the armor, today’s jobs number showed that once again our economy is incredibly resilient and moving forward," said Ryan Detrick, chief market strategist at LPL Financial.
Notable job gains were seen in leisure and hospitality (+380,000), which saw two-thirds of the jobs gained in food services and drinking places. Public and private education (+261,000), professional and business services (+60,000), transportation and warehousing (+50,000) also saw sizable gains. Construction and wholesale trade were little changed.
The jobs gains occurred as three additional states ended the supplemental $300 per week in unemployment benefits. A fourth state, Maryland, was scheduled to end the benefits but was blocked from doing so by a Baltimore judge.
The labor force participation rate was little changed at 61.7%. The rate has held between 61.4% and 61.7% since June 2020.
Average hourly earnings rose 0.4% month over month and 4% annually. Economists had expected respective increases of 0.3% and 3.8%.
The U.S. economy has gained 16.7 million jobs since April 2020 but is down by 5.7 million from pre-pandemic levels.
As the economy continues to recover from its COVID-19-induced slowdown, economists have begun to question the need for the emergency measures put in place during the early days of the pandemic. The Fed slashed interest rates to near zero and has been buying U.S. Treasurys and other assets at a pace of $120 billion per month.
The central bank said at its most recent meeting that it would need to see "substantial further progress" before beginning the tapering process.
Recent comments from Federal Reserve Board members Richard Clarida and Christoper Waller indicated a run of strong jobs reports would be evidence of such progress.
Fed tapering is "squarely on the table for 2022," said Cliff Hodge, chief investment officer at Cornerstone Wealth.