Jobs report for July: 528,000 jobs added

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Payrolls rise 528,000, more than double estimates

Hot jobs data bolsters case for 75 Bps Fed hike

Unemployment rate falls to 3.5% from 3.6%

Labor-force participation rate drops

Treasury yields surge while stock futures tumble

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There’s no sign of a recession or even a slowdown in the jobs numbers. Headline job creation, at 528,000, was more than double what was expected. The unemployment rate unexpectedly ticked down to 3.5%, matching the pre-pandemic low. And wage growth defied expectations for moderation, staying at 5.2%.

This is only the first of four important reports that will determine the outcome of next month’s Fed meeting: There’s another jobs report before then, as well as two consumer price index readings. But investors are seriously marking up the odds of another hike of 75 basis points instead of 50 in September based on these numbers.

Total payroll employment finally eclipsed the February 2020 peak last month, erasing the pandemic shortfall. It’s an important milestone, but of course, the population is higher, too, since then. So, the employment-to-population ratio is still just 60%, versus 61.2% in February 2020, and the same measure for the prime working-age demographic is 80%, versus 80.5% pre-pandemic.

The only real “down arrow” in the headline numbers was labor force participation: It ticked down to 62.1% in July. But that was arguably tempered by the fact that prime working-age participation ticked up, to 82.4%. That suggests a strong job market is still pulling people off the sidelines and into employment.

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