Job growth in the U.S. hit a snag in July, with the Labor Department reporting a meager addition of 114,000 nonfarm payrolls, far below the expected 185,000.
This slowdown, coupled with a rise in the unemployment rate to 4.3%, has stoked fears of an economic slowdown.
June’s job gains were revised down to 179,000, marking a sharp contrast to the robust 215,000 average over the past year.
Average hourly earnings edged up by just 0.2% for the month and 3.6% year-over-year, missing forecasts of 0.3% and 3.7%, respectively.
This underwhelming growth sent stock futures down and Treasury yields plummeting.
“Temperatures might be hot around the country, but there’s no summer heatwave for the job market,” remarked Becky Frankiewicz, president of ManpowerGroup. “We’ve lost most of the gains from the first quarter.”
Healthcare-led job creation with 55,000 new positions. Construction added 25,000 jobs, government 17,000, and transportation and warehousing 14,000.
Leisure and hospitality, a consistent growth sector, saw a modest gain of 23,000 jobs. Conversely, the information services sector shed 20,000 jobs.
The household survey painted an even grimmer picture, with only 67,000 jobs added and 352,000 more people unemployed. The labor force participation rate nudged up to 62.7%.
Recent mixed economic signals have left financial markets jittery about the Federal Reserve’s next move.
While there were initial cheers for a potential September rate cut, those were dampened by a spike in unemployment claims and a flagging manufacturing sector.
“The latest snapshot of the labor market is consistent with a slowdown, not necessarily a recession,” said Jeffrey Roach, chief economist at LPL Financial.
However, he noted, that the rise in part-time workers for economic reasons to 4.57 million is troubling.
An alternate measure of unemployment, which includes discouraged and part-time workers for economic reasons, surged to 7.8%.
Long-term unemployment also rose, with 1.54 million people out of work for 27 weeks or more.
Despite the concerns, Fed Chair Jerome Powell expressed confidence in the “solid” economy, suggesting that easing inflation might allow for rate cuts soon.
Markets have priced in at least a quarter-point rate cut at each of the remaining Fed meetings this year.
The slowdown in job growth and rising unemployment rate could have ripple effects across the business sector, potentially impacting investments and consumer spending.
Clark Bellin, chief investment officer at Bellwether Wealth, emphasized the importance of the Fed staying ahead of the curve.
“The labor market has shown resilience, but the Fed needs to proceed with its expected September rate cut to mitigate further slowdown,” he said.
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