Bombshell Jobs Report: All Pandemic Jobs Lost Restored, Flipping Recession Script And Fueling Inflation, Fed Fears

The SPDR S&P 500 ETF Trust SPY traded lower by 0.8% Friday morning after the Labor Department reported encouraging U.S. jobs market numbers from July.

• The U.S. added 528,000 jobs in July, beating consensus economist estimates of 258,000 jobs. 
• The U.S. unemployment rate dropped from 3.6% to 3.5%, returning to its pre-COVID pandemic level. 
• The labor participation rate dropped 0.1% to 62.1% and remains below its 63.4% pre-pandemic rate in February 2020.
• Wages were up 5.2% from a year ago and by 0.5% from June.

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Both total nonfarm employment and the unemployment rate have now finally returned to their February 2020 pre-pandemic levels.

The Labor Department also revised May's total job growth higher by 2,000 jobs to +386,000 and June's job growth higher by 26,000 jobs to +398,000. The combined revisions totaled 28,000 additional jobs.

The leisure and hospitality industry led the job creation in July, adding 96,000 positions. The leisure and hospitality industry has still lost 1.2 million total jobs overall since February 2020.

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Following the release, the bond market is pricing in a 63.5% chance the Federal Reserve will issue another 0.75% interest rate hike at its September meeting, up from 34% a day ago, according to CME Group. The chance of a 0.5% September rate hike now stands at 36.5%, down from 66% just 24 hours ago.

Voices From The Street: Ryan Belanger, managing principal and founder at Claro Advisors, said businesses don't seem to be letting recession talk hold them back from hiring.

"Our message to investors is to stay invested, but focus on high quality dividend paying stocks, as market volatility is unlikely to end until inflation data starts to soften and the Federal Reserve pauses its tightening," Belanger said.

Bryce Doty, Sr. VP/Sr. Portfolio Manager at Sit Fixed Income Advisors said the strong jobs report is a "mixed blessing" for investors.

"It gets the country closer to the four plus million of workers needed to reduce shortages enough to stem inflation, but gives the Fed more fuel to justify destroying both supply and demand by raising rates even further," Doty said.

Charlie Ripley, senior investment strategist at Allianz Investment Management, said it is nearly impossible to find any weakness in the labor market these days. "Overall, today’s report should put the notion of a near-term recession on the back-burner for now and force the aggressive hand of the Fed by putting a 75-basis-point rate hike back on the table for the September FOMC meeting," Ripley said.

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