The U.S. economy created only 114,000 jobs in July, marking a significant slowdown from the 179,000 jobs added in June, according to the latest data from the Burea of Labor Statistics.
- This figure is the second lowest in the last fifteen months and fell short of economists’ expectations, which projected a gain of 175,000 jobs.
- Even if the projection had been accurate, it would still have been below the 2024 average of 217,000 jobs per month.
The unemployment rate rose to 4.3% in July, up from 4.1% in June, reaching its highest level since September 2021. This increase also exceeded economists’ forecasts, which anticipated the rate would remain steady at 4.1%.
Job Leaders: Health care led job gains with 55,000 new positions in July, accounting for nearly half of the total job growth. Construction followed with 25,000 jobs, while transportation and warehousing, government, and social assistance sectors added 14,000, 17,000, and 9,000 jobs respectively.
- On the flip side, the information sector saw a decline of 20,000 jobs. Other sectors such as retail trade, financial activities, professional and business services, and leisure and hospitality showed no significant change.
Wage growth also slowed in July, with average hourly earnings rising just 0.2% to $35.07, down from 0.3% in June. This marks the third instance of such low wage growth this year. On an annual basis, wage growth decelerated to 2.6% in July from 3.8% in June, hitting its lowest level since May 2021.
Revisions to the previous two months’ data also painted a less rosy picture. May’s job growth was adjusted downward by 2,000 to 216,000, while June’s figures were revised down by 27,000, bringing the monthly gain to 206,000.
What They’re Saying: The immediate reaction from economists and analysts focused on the implications for the Federal Reserve’s monetary policy. Jeanna Smialek commented on Twitter, “This jobs report is bad news for the Fed: Worries that they’re behind the curve are really going to skyrocket.”
- Mark Zandi of Moody’s Analytics echoed this sentiment, stating, “The clear message in today’s soft jobs report is the Federal Reserve needs to cut interest rates. They should have begun cutting rates months ago. Job growth is decidedly throttling back, unemployment is rising quickly, hours worked per week are low and falling, and temporary help jobs continue to evaporate. Wage growth and inflation are back to the Fed’s target. The question isn’t whether the Fed should cut in September, but by how much.”
Looking ahead, as Zandi notes, the debate has quickly shifted from will there be a rate cut in September to how big the rate cut will be in September. The CME Fed Watch tool is already showing traders projecting a 75% chance of a 50 bip cut in September…
