Hiring roughly held steady in July as employers added 187,000 jobs despite high interest rates and inflation.
The unemployment rate, which is calculated from a separate survey of households, dipped from 3.6% to 3.5%, the Labor Department said Friday.
Economists surveyed by Bloomberg had estimated that 200,000 jobs were added last month.
Payroll gains for May and June were revised down by a total of 49,000, portraying a somewhat softer spring labor market than believed. The June rise in employment was downgraded to 185,000 from 209,000. As a result, June and July mark the first months of sub-200,000 job gains since December 2020.
What is the wage growth rate?
Average hourly earnings rose 14 cents to $33.74, keeping the yearly increase at 4.4%. Although pay increases have slowed from more than 5% last year, they’re still too high for a Federal Reserve seeking to push them down to 3.5% or lower to align with its 2% overall inflation target.
Kathy Bostjancic, Nationwide’s chief economist, says the report doesn’t tip the scales either way in the Fed’s decision whether to hold interest rates steady the rest of the year after a historic flurry of rate increases or approve an additional hike as soon as mid-September. The central bank, she says, will want to see the August jobs report and two more monthly inflation readings before making that call next month.
What industries are seeing job growth?
Private sector-job growth rebounded to 172,00 from a meager 128,000 in June while federal, state and local governments added 15,000 jobs, a slowdown from recent months.
In July, health care led the job gains with 63,000. Financial activities and construction both added 19,000. Leisure and hospitality added 21,000, its fourth straight month of relatively modest advances after driving job growth during the recovery from the pandemic as restaurants and bars ramped up hiring.
Professional and business services, another large sector that typically powers employment growth, shed 8,000 jobs.
“The big picture here is that the wave of post-COVID catch-up hiring now appears to be over,” Ian Shepherdson, chief economist of Pantheon Macroeconomics wrote in a note to clients.
There are other signs the labor market is cooling. Employment at temporary help services fell by 22,000 following a 20,000 decline the previous month. And the average workweek slipped to 34.3 hours, reclaiming the low reached in May and shortly before the pandemic (excluding the early days of COVID).
Employers tend to reduce temporary workers and shave staffers’ hours before they lay off workers.
Is the job market growing?
Job growth has downshifted this year. Employers added an average of 218,000 jobs a month from May through July, down from an average 288,000 the first four months of the year and 399,000 in 2022. But the slowdown has been more gradual than economists projected in light of sharply higher interest rates and inflation.
Experts credit lingering pandemic-related labor shortages that have made employers reluctant to lay off workers even as they’ve pulled back hiring amid the Federal Reserve’s aggressive interest rate hikes and softer consumer demand.
Many forecasters, in turn, now believe the U.S. may dodge a recession that seemed all but certain several months ago.
In an interview, Acting Labor Secretary Julie Su said the outsize job gains of 2021 and 2022, as the labor market recovered from the health crisis, “were not going to be sustainable” and Friday’s report is “a sign of steady, stable growth.
“We’re getting to numbers that are sustainable,” she said.
Morgan Stanley expected job gains to continue to moderate in July now that Americans’ post-COVID pent-up demand for travel and other services largely has run its course. Average monthly payroll gains in leisure and hospitality, which includes restaurants and hotels, slowed to 19,000 in the second quarter from 67,000 early in the year, the research firm noted.
During the first half of the year, state and local government hiring bolstered employment, making up nearly a quarter of all payroll gains. But Morgan reckoned that trend likely lost some steam last month, in part because of summer school closings.
Yet public education payrolls are still below their pre-COVID level and so a smaller than normal contingent of teachers and other staff may have left jobs in July, says economist Nancy Vanden Houten of Oxford Economics.
Others said persistent worker shortages could have juiced summer hiring. In tight labor markets, employers are eager to scoop up the student summer workforce, says Goldman Sachs economist Spencer Hill.
