The US economy added more jobs than expected in July as employment rose by 943,000.

There were gains in sectors including leisure and hospitality, education and professional services.

Forecasts for jobs created last month had varied widely from 350,000 to 1.6 million, with a consensus of 870,000.

But the figures mainly pre-date the rise of the Delta variant of Covid in the US which has led to a surge in infections.

There are also fears new restrictions could be imposed.

“It’s been a sprint in terms of growth, but we may be moving into more of a marathon,” said Scott Anderson, chief economist at Bank of the West in San Francisco.

“Travel season is winding down, and the Delta variant is a big concern.”

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The hiring in July helped lower the unemployment rate by 0.5 percentage points to 5.4%. In all, 8.7 million people remain unemployed, down considerably from the highs seen in April last year.

However, that is still well above the pre-pandemic measure of 5.7 million in February 2020.

Despite the concerns about Delta, economists said the figures hinted at the underlying strength of the economy’s recovery.

Richard Flynn, UK director at Charles Schwab, said the numbers were “an encouraging sign for markets that the economic reopening has kicked into a higher gear”.

“This is a strong report,” said Aberdeen Standard Investments deputy chief economist James McCann, adding that it would “cement” the view that the US central bank, the Federal Reserve, was likely to begin slowing the pace of its large-scale asset purchases.

“[Fed chair Jay] Powell may well use the meeting of central bank policymakers in Jackson Hole later this month to provide further hints, but he has made clear that these jobs reports are a cornerstone in the Fed’s thinking on tightening policy,” he said.

Variable recovery

In the first three months of the year, the US economy rebounded faster than expected after contracting sharply in 2020.

But in the second quarter, the recovery slowed following a rise in coronavirus cases, growing at an annualized rate of 6.5%, well below forecasts of 8.5%.

The country is also grappling with a labor shortage, which has left employers unable to fill a record number of job openings.

Some experts have blamed the shortfall on a lack of affordable childcare, concerns about catching the virus, and pandemic-related retirements and career changes.

Some also believe there are too many low-skilled jobs being advertised, and not enough suitable candidates to fill them.

Aaron Anderson, senior vice president of research at Fisher Investments, said: “Job openings are sky-high in areas like manufacturing, travel, and leisure, yet employees are hesitant to come back.

“It’s difficult to say how long workers will remain on the sidelines, but Covid-19 sensitivities should eventually fade, opening the door to greater employment gains.”

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