In July, U.S. businesses demonstrated steady hiring by adding 187,000 jobs, maintaining the pace set in June. However, this fell slightly short of analysts’ expectations of 200,000 new jobs for the month. The unemployment rate saw a slight drop from 3.6% in June to 3.5% in July, according to the Labor Department’s report.
Although job growth has slowed compared to earlier in the year, it is still notable that employers are continuing to add new jobs despite the Federal Reserve’s series of interest rate hikes. These rate hikes have made it more expensive for businesses to expand, but concerns about the economy tipping into a recession have been somewhat alleviated by ongoing job creation.
Eric Merlis, managing director and co-head of global markets at Citizens, commented that the U.S. jobs report for July was largely in line with expectations, but acknowledged that the labor market is softening as employers face changing circumstances. Merlis also emphasized the importance of the monthly jobs numbers as they serve as a key measure of the impact of the Fed’s efforts to curb inflation and demonstrate the resilience of the economy.
According to the Labor Department, July’s hiring data indicates a slowdown compared to the average monthly hiring rate over the previous 12 months, during which employers were adding an average of 312,000 new positions each month. Industries that saw job growth in July included healthcare, social assistance, financial activities, and wholesale trade.
The Federal Reserve is closely monitoring the economy for signs of inflation tempering in response to the series of interest rate hikes. Despite hitting a four-decade high last year, inflation still stood at 3.1% in June, above the Fed’s goal of 2%. Stephen J. Rich, CEO of Mutual of America Capital Management, suggested that the slower job growth in July could be a positive indicator for the Fed’s efforts to prevent a wage-price spiral, whereby higher wages due to a low supply of workers lead to increased costs for companies, which may then pass on those costs to consumers.
Wages rose by 0.4% in July, reaching an hourly average of $33.74, according to the Labor Department. This was in line with the wage increase seen in June and slightly higher than the 0.3% increase predicted by some analysts. On an annual basis, average earnings in July saw a 4.4% increase from the previous year, with wage growth particularly notable for production and non-supervisory workers, who represent about 82% of the workforce.
Rubeela Farooqi, chief U.S. economist at High Frequency Economics, noted that wages did not ease as expected, which could disappoint policymakers. In June, businesses added around 209,000 jobs, but the Labor Department revised this number downward to 185,000 jobs in their recent report.
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