U.S. Job Growth Slows in July

Investing.com — The U.S. economy added significantly fewer jobs than anticipated in July, indicating a cooling labor demand in the world’s largest economy.

Nonfarm payrolls came in at 114,000 last month, the lowest since January 2021, down from a revised 179,000 in June, according to Labor Department data released on Friday. Economists had predicted the July number at 177,000.

The June reading was heavily revised down from an initial 206,000. The May reading was also revised down by 2,000, to 216,000, making the combined employment in May and June 29,000 lower than previously reported.

Employment continued to trend positively in health care, construction, and transportation and warehousing, while the information sector saw job losses.

Meanwhile, the unemployment rate rose to 4.3%, up from 4.1% in June, increasing for the third consecutive month. Month-on-month average hourly wage growth came in at 0.2%, below the expected 0.3%.

Over the past 12 months, average hourly earnings have increased by 3.6%.

The U.S. Bureau of Labor Statistics noted that Hurricane Beryl made landfall on the central coast of Texas on July 8, but its impact on national employment and unemployment data for July was negligible.

Data released earlier this week indicated that U.S. job openings fell modestly in June, and new applications for unemployment benefits increased to an 11-month high last week.

The Federal Reserve maintained its benchmark overnight interest rate in the 5.25%-5.50% range on Wednesday, unchanged since last July, but hinted at reducing borrowing costs. In their accompanying statement, the Fed softened its description of inflation and alleged that risks to employment are now comparable to those linked to rising prices.

A cooling labor market will provide the Federal Reserve more grounds to lower interest rates from over two-decade highs, potentially in its September meeting.

Analysts at Capital Economics stated, “The sharp slowdown in payrolls in July and sharper rise in the unemployment rate makes a September interest rate cut inevitable, which could start the loosening cycle with a 50 bp cut or even an intra-meeting move.”