The labor market showed remarkable strength in July, blasting past economists’ forecasts to add 528,000 jobs and bringing employment back to pre-pandemic levels, the Labor Department reported on Friday.

Economists had forecast a gain of around 250,000, following June’s 372,000 number.

The gains were widespread across industries, with the unemployment rate falling to 3.5%, equal to its pre-pandemic reading.

The report will make things complicated for the Federal Reserve, which is trying to slow economic demand to curb inflation, which is now running at a 9.1% annual rate. The Fed expects job growth to slow, but July shows that has not happened yet.

There are some signs of the broader labor market cooling in recent weeks, with unemployment claims rising to 260,000 in the past week after having bottomed out earlier this year. Job openings, meanwhile, have fallen below 11 million, although there are still 1.8 jobs for every unemployed person.

But companies continue to hire and post for new employees, says Becky Frankiewicz, president of Manpower Group North America.

Frankiewicz says demand from employers for workers was up 6% in July from June – a period when there is usually a seasonal decline – and was boosted by blue-collar work.

As for widely publicized layoffs at some top tech companies, she says the market has already absorbed those workers. “Unemployment in tech is still below 1%,” she notes.

“We are not seeing a free-fall in hiring,” Frankiewicz says. “We are still seeing companies hiring and stealing talent from each other.”

Other sectors of the economy, particularly housing, have softened much more in the face of higher interest rates from the Fed.

Meanwhile, the economy suffered a contraction of 0.9% in the second quarter after a 1.6% drop in the first quarter. By some definitions, that constitutes a recession, although that is not the only requirement.

Human resources firm UKG says it has seen a slight reduction in the jobs it tracks in the shift work part of the labor force, with retail and hospitality down but manufacturing up.

“While there’s no indication yet of broad-based layoffs outside of specific sectors, like finance and technology, we are seeing businesses begin to pull back on new hiring,” Dave Gilbertson, vice president at UKG, says in an email. “Although the labor market remains tight, this gradual decline in job creation would indicate that efforts to slow the job market are starting to work.”

Other recent data on consumer spending and service sector activity shows the economy still growing in July.

“But why are we worried about a recession?” Lightcast Chief Economist Bledi Taska asked on Thursday in a note. “In the past, such as in 2008, recessions have meant people lose work or even their houses, facing real hardship because of where the economy as a whole was going. That’s not happening this time. Job openings are down, but looking across the labor market, very few people are losing the jobs they already have. That’s good news.”

A White House official on Thursday tried to soften any blow from a potentially lower jobs number than was seen in June, pointing out that it would be in line with projections for a transition in the economy from the rapid growth of the pandemic recovery to a more normal rate.

“And during that transition, what you’ll see instead of record-high-breaking jobs numbers that we’ve been seeing every month in the realm of 500,000 to 600,000 jobs on average per month, we’re expecting to be closer to 150,000 jobs per month,” the official said.

“And so that would actually be a sign of a success of this transition,” the official added. “And this kind of job growth is consistent with the low unemployment numbers that we’ve been seeing.”

Simona Mocuta, chief economist at State Street Global Advisors, said the new jobs report is “a point scored for the camp arguing that vacancies can decline without the unemployment rate rising much.”

“But, we are only in the early days of tightening (and) policy acts with a long lag and there is still a lot of data to come from here until the September meeting” of the Federal Reserve, she added.