The latest Employment Situation Summary from the Bureau of Labor Statistics, released this morning, signaled a US economy that cooled in July.
The labor market added 114,000 jobs last month, below the estimate of 185,000 and the second fewest number of additions in the past three and a half years (with April 2024, at 108,000 new jobs, being the lowest month during this period). Last month was also the smallest number of additions for any July dating back to 2019 and marks a continued downward trend that has been experienced here in 2024. In Q1, average monthly additions totaled 267,000; in Q2 they contracted to 167,000; and one month into Q3, they total 114,000 (as previously noted).
The additions were largely led by private education and health services (at 57,000) and construction (25,000)—both of which were large contributors in June—as well as leisure and hospitality (23,000). Government, which had a downwardly-revised 43,000 job additions between May and June, created only 17,000 new jobs between June and July. Information led job losses (with 20,000) followed by other services (5,000) and financial activities (4,000).
The unemployment rate ticked higher in July (to 4.3%), rising 0.2% month-over-month and above the 3.5% seen one year ago. July also marked three consecutive months of the unemployment rate being at or above 4.0% and reached its most elevated level since October 2021. Average hourly earnings increased 0.2% on the month and were up 3.6% from one year ago, both landing below the forecasts of 0.3% and 3.7%, but pointing to wage growth remaining strong and adding to inflationary pressures.
With a September rate cut having been priced into the market after inflation data edged lower as of late, today’s data release now has markets predicting a half a percent cut in the interest rate at the Federal Reserve’s next meeting. Four of every five respondents to CME’s Fedwatch Tool are expecting a target rate of 475 to 500 come September 18th. July’s jobs report has also caused some trepidation, as the Sahm rule has been triggered and recession woes have begun to take center stage. In rennie intelligence’s most recent article, we noted that a rate cut will be close to a certainty if the handful of data releases before the September meeting continue to show a slowing in the inflation rate and a cooling economy. It’s safe to say today’s release contributed to the latter.
