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Unemployment falls to 3.5 in July adding 528,000 jobs: What does this mean about a possible recession?

The BLS has reported that the US unemployment rate decreased to 3.5. What does this mean for the economic recovery?

Update:
New York unemployment benefits in 2022
ANDREW KELLYREUTERS

Unemployment dropped slightly in July to 3.5 percent with 528,000 being added to the economy. This rate is down from the 5.8 percent figure recorded in July 2021.

The largest gains were seen in the leisure and hospitality, professional and business services, and health care sectors.

The BLS also reported that for the first time in over two years of pandemic, “both total nonfarm employment and the unemployment rate have returned to their February 2020.”

Unemployment decreases for Black women

Interestingly, on average, the unemployment rate for adult women is 0.1 percent lower than that of adult men which stands at 3.2 percent. The unemployment rate for Black workers increased from 5.8 to 6.0 percent from June to July. However, for Black women the average unemployment rate fell from 5.6 to 5.3 percent.

Long-term unemployment returns to pre-pandemic levels

Another major milestone highlighted in the July Employment Report is that it showed decreases in the number of long-term unemployed workers by more than 269,000, returning to the level seen in February 2020. When looking at unemployment in its totality, the long-term unemployed make up around 18.9 percent of those out of work, down from thirty-eight percent from July 2021.

Additionally, compared to this time last year, the labor participation rate has increased by 0.4 percent to 62.1 percent.

From a numbers perspective this is good news, later this month we will be able to better evaluate the quality of jobs according to their pay and benefits.

How could increasing interest rates impact unemployment?

Many have some concerns that the Federal Reserve’s move increase interest rates could increase unemployment as businesses scale back borrowing.

This report comes at a time where the US central bank is attempting to decrease demand in the market to meet supply by increasing interest rates as a historic pace. As the economy moves toward on uneven ground, corporations are taking in profits at levels never before seen and families across the country struggle to keep up with inflation.

Additionally, compared to this time last year, the labor participation rate has increased by 0.4 percent to 62.1 percent.

The Federal Reserve projections for the next three years show that unemployment will increase to 4.1 percent by 2024 and rise to 3.7 percent by the end of this calendar year. In a recession one expects unemployment to rise, which is exactly what the Federal Reserve is expecting.

This news comes as the US’ central bank opts to increase interest rates at a historic place in an attempt to decrease inflation. There is, however, one problem being that it is unclear whether or not the monetary policy of increasing the value of money will have an impact on prices in the desired way.

If it does not bring down costs for families while increasing unemployment, the Democrats could face electoral challenges in the fall.

In a recession one expects unemployment to rise, which is exactly what the Federal Reserve is expecting.

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