The U.S. job growth has been slower with economy adding fewer jobs than expected in July, but U.S. wages growth rate has been solid and a decline in the unemployment rate back to 3.5% pointed to continued tightness in labor market conditions.
The Labor Department’s employment report on Friday also showed U.S. job growth rate in May and June were revised lower, potentially suggesting demand for labor was slowing in the wake of the Federal Reserve’s hefty interest rate hikes.
But with 1.6 job openings for every unemployed person in June, the moderation in hiring may also be the result of companies failing to find workers.
The mixed report did not change growing perceptions among economists that the Fed could engineer a “soft landing” for the economy, though much would depend on the direction of inflation and wage growth after annual increases in prices slowed sharply in June.
Nonfarm payrolls increased by 187,000 jobs last month, the Labor Department’s survey of establishments showed. Data for June for U.S. job growth rate was revised lower to show 185,000 jobs added instead of the previously reported 209,000. The U.S. job growth in June was the slowest since December 2020.
U.S. job growth showed 49,000 fewer jobs in May and June than previously reported. Economists polled by Reuters had forecast a gain of 200,000 jobs. Payrolls growth has averaged 218,000 jobs per month over the past three months, a sharp slowdown from the average of 434,000 during the same period last year.
The average workweek fell to 34.3 hours, from 34.4 hours in June.
There is a need to create roughly 100,000 jobs per month to keep up with growth in the working age population. There was no indication that a heat wave in July, had impacted U.S. job growth rate.
U.S. job growth rate sectorwise
- Employment gains last month were led by the healthcare sector, where payrolls increased by 63,000.
- Financial activities payrolls rose by 19,000.
- The construction sector boosted headcount by 19,000, driven by hiring of residential specialty trade contractors and nonresidential building construction.
- The leisure and hospitality sector added 17,000 jobs. Employment in leisure and hospitality remains below its pre-pandemic levels by 352,000 jobs.
- Professional and business services employment decreased by 8,000 jobs.
- Manufacturing shed 2,000 jobs.
- The information industry continued to lose jobs.
- Government payrolls increased for the 13th straight month as declines in state and local government education were more than offset by gains in hiring elsewhere.
U.S. stock market
Stocks on Wall Street were trading higher while the dollar was lower against a basket of currencies. U.S. Treasury yields fell.
Fall in unemployment
Household employment increased by 268,000 jobs, more than offsetting a rise of 152,000 in the labor force.
As a result, the unemployment rate fell to 3.5% from 3.6% in June, dropping back to levels last seen more than 50 years ago. That is well below the Fed’s latest median estimate of 4.1% by the fourth quarter of this year.
The labor force participation rate, or the proportion of working-age Americans who have a job or are looking for one, was unchanged at 62.6% for a fifth straight month.
U.S. wages growth
With the labor market still tight, U.S. wages growth saw a rise at a brisk clip. Average hourly earnings climbed 0.4%, matching the gain in June. That kept the year-on-year increase in wages at 4.4%.
The inflation and wage growth is tilted. U.S. wages growth is rising faster than inflation, boosting households’ purchasing power and underpinning consumer spending as well as keeping the overall economy afloat.
Though annual U.S. wages growth remains too high to be consistent with the Fed’s 2% inflation target, economists do not believe that last month’s readings on their own were sufficient to justify another rate hike this year.
Annual inflation slowed sharply in June and wages moderated in the second quarter. Productivity also rebounded in the second quarter, curbing growth in labor costs. Financial markets expect the Fed will keep rates steady for the rest of the year, as per report.
