The United States surprises by accelerating job creation and lowering the unemployment rate to 3.5%

Recession?

It does not seem.

The US labor market has once again surprised with its strength.

Job offers are seen at street level in any city in the country.

And the data confirm appearances.

Job creation increased its pace in July, according to official data published this Friday, despite persistent inflation, the withdrawal of fiscal stimulus and the rise in interest rates.

The unemployment rate has dropped to 3.5%, the level prior to the pandemic, which is also the lowest in recent decades.

In July, 528,000 nonfarm jobs were created, more than double what was expected, according to Labor Department statistics.

It is the strongest job creation since February.

With this, the world's leading economy has fully recovered the 22 million jobs that were lost in the first months of the pandemic.

Employment already exceeds the record levels of February 2020. The unemployment rate, which is calculated through another survey, stands at 3.5%.

The labor market continues to be robust and the job offers available far exceed the number of unemployed.

Strong job creation drives away the specter of recession for now.

The US economy shrank in the first two quarters of this year, according to preliminary estimates released last week.

Although this criterion is the one commonly used to define a recession, there is academic discussion about whether this is the case.

On the one hand, the growth figures are pending review.

On the other hand, the strength of the labor market is hardly compatible with a recession.

In the United States, business cycles are semi-officially certified by the National Bureau of Economic Research (NBER), a private institute, which uses multiple scales for this and usually takes months to make a pronouncement.

The president of the Federal Reserve, Jerome Powell, is one of those who agrees with the United States, Joe Biden, when he rules out that the United States is in a recession.

However, he is aware that the rapid rise in interest rates that the Fed has undertaken to combat inflation may end up causing it.

The cooling of the labor market may be more noticeable this fall, according to forecasts.

But those forecasts are the same ones that have failed this time.

The data known today comes after two statistics that pointed to a certain weakening of the labor market of the world's leading economy.

On Tuesday a decrease in the number of job vacancies was known and this Thursday it was learned that applications for unemployment benefits have risen to the highest level in six months.

Therefore, the surprise has been even greater.

Economists expect a creation of about 250,000 jobs in July.

The Federal Reserve carefully scrutinizes every data release to temper the pace of interest rate hikes.

After four rises so far this year, the last two of 0.75 basis points, rates are at 2.5%.

Powell declined to give many hints about the magnitude of the next hike, at the meeting scheduled for September 20-21.

The data published until then, including inflation for the months of July and August, will be decisive.

For now, the strength of the labor market supports the thesis that more aggressive hikes will be needed to cool down the economy.

Biden is aware that inflation is ruining his popularity just three months before the midterm legislative elections, in which a third of the Senate and the entire House of Representatives are renewed.

He has renamed his star law the Inflation Reduction Law, despite the fact that it will have little short-term effect on it.

But if a full-blown recession coupled with rising prices, all his efforts to regain the initiative would be doomed to fail.

The strength of job creation is for the time being an asset in his favour.