US jobs grew well below expectations in July – NFP
The recent US job growth data for July presents a concerning picture of the labor market, with nonfarm payrolls increasing by only 114,000 jobs, significantly below economists’ expectations of 176,000. This follows a downwardly revised increase of 179,000 in June, indicating a notable slowdown in job creation.
Key points from the employment report include:
- Unemployment Rate: The unemployment rate rose to 4.3% in July from 4.1% in June, marking the fourth consecutive monthly increase. This rise could heighten fears of a weakening labor market and potential recession risks.
- Job Growth: The job growth of 114,000 in July was well below the expected range of 70,000 to 225,000. This shortfall can partly be attributed to Hurricane Beryl, which affected Texas and Louisiana during the payrolls survey week, disrupting economic activity and job creation in those areas.
- Wage Growth: Average hourly earnings increased by 0.2% in July after a 0.3% rise in June. On a year-over-year basis, wages grew by 3.6%, the smallest increase since May 2021, following a 3.8% rise in June. While wage growth remains above the range consistent with the Federal Reserve’s 2% inflation target, the slowdown in wage gains is seen as favorable for controlling inflation.
- Hiring Trends: Government data showed that hiring dropped to a four-year low in June, indicating that the labor market slowdown is driven more by reduced hiring activity rather than an increase in layoffs. This trend is influenced by the Federal Reserve’s interest rate hikes in 2022 and 2023, which have dampened demand.
- Impact on Federal Reserve Policy: The combination of slowing job growth, rising unemployment, and moderate wage gains is likely to reinforce the case for a rate cut by the Federal Reserve in September. The recent employment data aligns with other inflation-friendly economic indicators, suggesting that the Fed’s efforts to curb inflation might be yielding results.
In summary, the July employment report highlights a deceleration in job growth and rising unemployment, which could signal vulnerabilities in the US economy. This situation is compounded by external factors like Hurricane Beryl and internal factors such as the impact of previous interest rate hikes.
The Federal Reserve is expected to respond with a rate cut in September to support economic stability.