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The Big Number

It’s that time again. The monthly jobs report, set for release at 8:30 a.m. tomorrow, is expected to show the labor market’s still kicking.

Economists estimate the US added 200,000 jobs in July, about the same as in June, while the unemployment rate held near its lowest level in decades.

The persistent strength of the labor market has been a bit of a mystery — a welcome one, of course — to economists, given how fast the Federal Reserve has increased interest rates. In fact, the unemployment rate is expected to remain at the same level it was when the central bank first starting raising rates over a year ago — 3.6%.

The job market’s resilience is the backbone of the economy. Low unemployment means most Americans who want a job have one. That — paired with easing inflation — gives Americans the ability to keep spending, powering the economy along. (Don’t forget about last week’s surprisingly strong GDP report.)

US GDP Growth

Source: Bureau of Economic Analysis

Note: Seasonally adjusted annual rates

Low unemployment paired with the downward trend in inflation is part of the reason there’s growing hope the US can avoid a recession. The slow decline in job vacancies, moderating wage growth and a pickup in the number of Americans working or seeking work also helps. In fact, just this week, Bank of America scrapped its forecast of a downturn in favor of a no-recession scenario.

For the White House, all the positive economic news has the side effect of bolstering President Joe Biden’s campaign for re-election.

But a lot hinges on inflation and whether it will continue to move toward the Fed’s 2% target. Next week, the closely watched consumer price index will be a key piece of data as the central bank considers whether continued labor market strength is a good thing, or an indication it needs to do more.