Fewer than anticipated, 187,000 jobs have been added

The U.S. labor market experienced weaker job growth in July, suggesting a slowdown in economic growth, as reported by the Labor Department on Friday.

In July, nonfarm payrolls expanded by 187,000, which fell slightly short of the Dow Jones estimate of 200,000. However, this represented a small improvement from the downwardly revised June figure of 185,000.

The unemployment rate in July was recorded at 3.5%, contradicting the consensus estimate of it remaining at 3.6%. This rate is only slightly higher than the lowest level since late 1969.

Average hourly earnings, a crucial indicator in the Federal Reserve’s battle against inflation, increased by 0.4% for the month, resulting in a 4.4% annual pace. Both of these figures exceeded the respective estimates of 0.3% and 4.2%.

The labor force participation rate remained steady at 62.6%, marking the fifth consecutive month at this level. On the other hand, a broader measure of unemployment that includes discouraged workers and those with part-time jobs for economic reasons decreased to 6.7%, down 0.2 percentage points from June. The household survey used to calculate the unemployment rate indicated a stronger gain of 268,000 jobs.

Job growth in the healthcare industry led the way in July, adding 63,000 jobs. Other sectors contributing to job creation included social assistance (24,000), financial activities (19,000), and wholesale trade (18,000). The “other services” category accounted for 20,000 jobs, including 11,000 from personal and laundry services.

Leisure and hospitality, which had been a prominent sector throughout most of the Covid pandemic recovery, only added 17,000 jobs in July. This aligns with a declining trend after averaging monthly gains of 67,000 during the first three months of 2023.

The totals for previous months were revised downward, with June’s count dropping to 185,000 (a revision of 24,000) and May being adjusted to 281,000 (down 25,000 from the previous estimate).

Despite the slower job gains, the economy has shown resilience against various challenges, particularly a series of 11 interest rate hikes by the Federal Reserve to control inflation.

Although many Wall Street experts have been predicting a recession for at least a year, economic growth has managed to remain positive due to consumers’ continued spending and a rebound in the services sector following disruptions caused by the pandemic.

The gross domestic product (GDP) gains have had an average annualized growth rate of 2.2% in the first half of 2023, and the Atlanta Fed’s GDPNow tracker is forecasting a 3.9% increase for the third quarter.

However, Fed officials, including Chairman Jerome Powell, have warned that the full impact of the interest rate hikes has yet to be felt. Economists are concerned that the Fed might tighten monetary policy too much and push the economy into a recession.

Recent inflation data has shown improvement, although the Fed’s preferred measure still indicates prices rising at a 4.1% annual rate, which is more than double the central bank’s target.

Wages have been a contributing factor to the inflation outlook. Average hourly earnings had been declining, but the annual figures are somewhat distorted due to comparisons with a year ago when wages were surging.

The Labor Department’s closely monitored gauge of compensation costs revealed a 4.5% increase over the past 12 months through the second quarter. This level is not aligned with the Fed’s inflation target.

Meanwhile, concerns about a recession on Wall Street seem to be diminishing. Goldman Sachs has gradually reduced its probability of a contraction, and Bank of America now believes that the U.S. could entirely avoid a recession.

This information is breaking news, and further updates will be provided.