943,000 jobs added to US economy in July
The unemployment rate in America fell to 5.4% on Friday as the US labour markets saw an additional 943,000 jobs in July.
The news comes as a signal that worker shortages that have hindered the US recovery are beginning to ease.
The non-farm payroll data far exceeded economists’ expectations for 870,000 new jobs, the the Bureau of Labor Statistics revealed.
Policymakers are keeping a close eye in the numbers as it could influence future policies geared towards aiding the continuation of the US recovery from the Covid-19 pandemic.
Robert Alster, CIO at investment management firm Close Brothers Asset Management comments: : “Payrolls continue to paint a positive picture of the US jobs market, but the Fed will be keeping a close eye on the detail before making any decisions.”
“Companies are still struggling to hire, with job gains constrained by either not enough workers, the wrong workers in the wrong place, or the wrong jobs at the wrong salaries. Teen workers currently make up a higher proportion of the labour market than usual, and Powell’s dashboard reveals an uneven recovery in terms of diversity and inclusion.”
Some companies have increased wages, while others have offered other incentives.
The figures may be masking something a little more troubling for the US economy, suggests Hinesh Patel, portfolio manager at Quilter Investors:
“The recent surge in Delta cases will not be picked up by these numbers and as such employment figures will remain a little volatile and difficult to interpret. This could even be somewhat of a highpoint for US employment for some time. Furthermore, the Delta variant has shown how vulnerable the global economy is to new strains of the virus emerging and creating new waves.”
“But for now, the Fed will be hoping everyone returns to work and offices in September once the Delta surge has eased off, confidence resumes and vaccination rates improve. The biggest problem the Fed has is the fact that the participation rate remains at a near 40-year low and they seem to think they have influence over this. This pandemic has changed the way the economy works and ushered in new waves of automation. This is something that they will struggle to control over the longer-term and will mean fiscal support will need to step up even as the recovery continues,” Patel added.