Jobs report comes in much cooler than predicted
MANHATTAN (CN) — The latest employment data may be good news for Wall Street hoping for interest rate cuts, but it was bad news for Main Street America.
The July jobs report, which was released Friday morning by the U.S. Bureau of Labor Statistics, showed just 114,000 jobs added, much lower than the 185,000 jobs most experts had forecast, continuing the recent trend of there not being any trend. Reports over the last six months have alternated higher and lower than expected.
Worse still, the two previous jobs reports also were revised down slightly; May’s employment report was tuned down by 2,000 jobs, while June’s was revised to show a loss of 27,000 jobs.
The unemployment rate also came in worse than hoped for, hitting 4.3% instead of the 4.1% most had predicted. While some analysts said Hurricane Beryl may have had an effect on the U.S. employment situation, the bureau noted the storm had “no discernable effect on national employment” last month.
The good news is that hourly earnings picked up by 0.2% in July, which helps those with a job to beat inflation. The average work week dropped slightly by 0.1 hour in July, though in the summer hours worked typically decline.
“The reality is this employment report flashes a warning signal that this economy does have the ability to turn rather quickly,” said Charlie Ripley, chief investment strategist at Allianz Investment Management, adding the “backdrop is no longer looking that great.”
The bureau's report is roughly in line with the other jobs report released this week by payroll company ADP, which showed 122,000 jobs gained in July, a good 30,000 jobs fewer than most analysts had predicted.
Once again, the job gains were mostly in the services industries, while mid-sized and large companies had all of the gains. Small establishments with fewer than 50 employees actually lost jobs last month, the report showed.
Wage growth also has slowed significantly, with those remaining at their jobs seeing 4.8% pay increases year-over-year. Workers who changed their jobs saw their pay increase at a slower pace, too, increasing 7.2% over the last 12 months.
“With wage growth abating, the labor market is playing along with the Federal Reserve’s effort to slow inflation,” Nela Richardson, ADP chief economist, said in a statement. “If inflation goes back up, it won’t be because of labor.”
Other employment data hint in largely the same direction. The monthly JOLTS report, which measures job openings and employment turnover, was well received by experts. Job openings remained unchanged at 8.2 million, while the quits rate also remained relatively stable at 5.1 million.
However, under the hood separations were higher in certain sectors, such as hospitality, real estate, and construction.
“The data continue to tell of a tale of two labor markets for those with and without a skill,” said Jeffrey Roach, LPL chief economist.
Overall, economists say the JOLTS report buttresses the theory that the job market is cooling at just the right amount.
“We think the details of the JOLTS report are a little softer than the headline figure for openings suggests,” Nancy Vanden Houten at Oxford Economics wrote in an investor’s note. “The pace of hiring has slowed, reflecting a cooling demand for labor.”
Another sign of a cooling labor market came from the Labor Department on Thursday, which reported that 249,000 initial unemployment claims were filed for the week ending July 27, higher than expected. Continuing claims also were slightly higher than expected, at 1.9 million, while the four-week average also nudged upward to 238,000.
“The bottom line is that we can’t be dismissive of the upward trend in claims over the last few months, which suggests an uptick in layoffs from low levels,” Vanden Houten wrote. “The rise in claims is consistent with an unemployment rate holding above 4%.”