The U.S. economy eliminated 23,000 jobs in July, a sign that the labor market has not yet stabilized after four months of positive growth. The data, released by the Bureau of Labor Statistics (BLS), contradicted the expectations of economists surveyed by Dow Jones, who had predicted the creation of 83,000 jobs.
The unemployment rate fell only slightly, to 4.1%. In another worrying sign, the BLS revised down the previous two months by a combined total of 103,000 jobs. May’s balance was reduced by 66,000, to 129,000 jobs created, while June’s was cut by 37,000, to 57,000.
The hiring data comes amid a complicated economic scenario. The U.S. war with Iran continues without an agreement to fully reopen the Strait of Hormuz. As a result, energy prices remain elevated, although below the year’s peaks.
Growth in average hourly wages also came in well below economists’ expectations. The wage gain was 0.1% from June, or 3.2% on an annual basis. That also falls below inflation, which was 3.5% in the latest reading.
‘This is the number that many Americans are focused on right now,’ said Heather Long, chief economist at Navy Federal Credit Union, to NBC News. Long highlighted that 3.2% is the lowest wage growth in five years. ‘At the same time, inflation is heating up again.’
Economists had expected wages to continue at a pace of 3.5% from a year ago. ‘The labor market is stagnating again,’ said Long, calling the report ‘gloomy.’
Long also pointed to another worrying data point: the labor force participation rate in July was the lowest since February 2021, a sign that workers are leaving the market. ‘It’s quite shocking,’ she said. ‘More than two million people have left the labor force since November.’
‘The magnitude of the error in the payrolls suggests that the labor market may be losing strength and can no longer be considered the pillar of resilience,’ said Charlie Ripley, investment strategist at Allianz.
The average price of regular gasoline also remains high, at $4.04 per gallon on Friday morning, up 36% since February 28, when the war with Iran began. Inflation continues well above the Federal Reserve’s 2% target, at 3.5%. Wages struggle to keep up.
The BLS reported that employment contracted most in ‘local government education,’ which fell by 50,000 jobs, likely reflecting teachers on summer break. There were also contractions of 19,000 jobs in retail and 14,000 in the financial sector.
The leisure and hospitality industry also contracted by 40,000 jobs. Economists watch this number closely, as a significant loss in hotels and restaurants can be an early warning sign of a shift in consumer spending.
‘In July, health care employment continued its upward trend,’ said the BLS, noting a gain of 22,000 jobs. But the agency said that was ‘a slower pace than the average monthly gain over the prior 12 months.’
The agency’s data also showed a gain of 5,000 jobs in manufacturing in July and an additional 22,000 jobs in construction. These positives come amid the AI data center boom, which has benefited some industries but has deeply divided many communities where the centers are located.
‘Employment showed little change’ in July in the mining, oil and gas, transportation, and professional and business services sectors, according to the BLS.
Stocks rose after the report, with investors who feared an interest rate hike by the Federal Reserve relieved. The S&P 500 jumped 0.5% and the Nasdaq Composite index rose 1%. The Russell 2000, which tracks small and mid-cap companies more sensitive to rate changes, rose 0.9%.
Bond yields fell, with the 10-year Treasury yield dropping to around 4.6%. That specific bond directs consumer loan rates, such as mortgages, credit cards, and personal loans.
Friday’s report likely eases some pressure on the Federal Reserve, which was widely expected to raise the federal funds rate — potentially as soon as September. Before the report, futures markets indicated odds of a September hike above 50%. After Friday’s jobs numbers, those probabilities fell to around 40%.