Aug. 5, 2024 at 2:40 AM EDT
The Bureau of Labor Statistics released the July jobs report this morning.
Here are the key data points:
Payrolls: An increase of 114,000 vs. 175,000 expected in July.
Revisions: June's gain was revised lower to 179,000 from 206,000; May's gain was revised lower to 216,000 from 218,000.
Unemployment rate: 4.3%, up from 4.1% last month.
Market reaction: Stocks sank, Treasury yields fell on worries about an economic slowdown.
Follow live coverage of the release below.
A weaker-than-expected July jobs report with few silver linings has commentators worrying about a snowballing economic slowdown.
Government data on Friday showed a smaller-than-expected gain of 114,000 nonfarm payrolls last month, as the unemployment rate ticked up to 4.3%—a nearly three-year high. The figure likely puts more pressure on the Federal Reserve: The central bank has kept interest rates elevated to bring down inflation, but also must manage the other side of its dual mandate, which is to pursue maximum employment.
“The Fed was late to recognize the inflation problem,” wrote Ronald Temple, Chief Market Strategist at Lazard, on Friday. “Let’s hope it doesn’t make the same mistake in the opposite direction.”
The U.S. economy added more than 250,000 jobs per month, on average, in 2023. The pace of hiring briefly ticked up in the first quarter of this year, then has softened materially since April. July was an acceleration in the job-market cooling from its most overheated levels of the postpandemic period.
In a more-welcome development for the Fed, that softening is taking some of the pressure off services inflation, which is closely tied to wages. Workers’ average hourly earnings were up 0.2% in July, to $35.07, which was slower growth than expected and slower than in June. The average workweek was 34.2 hours, down by 0.3% from June.
“What that means, from a holistic total-labor-input standpoint, is that payrolls de facto plunged -350k on the month!” wrote Rosenberg Research's David Rosenberg on Friday. “When combining the hours and bodies together, so far in Q3 we see that the index of aggregate hours worked is running negative at a -0.6% annual rate. In other words, absent another substantial productivity gain, we could be in for a GDP contraction for the current quarter.”
Others were less concerned by the July deceleration in hiring, characterizing it as more evidence of normalization in the labor market rather than a descent into an economic downturn.
“The July employment report was substantially softer than expected but it hardly qualifies as evidence of a recession,” wrote Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets, on Friday. “There is no question that the [Fed] will cut rates in September if the data continue to be as supportive to such a move as they were today.”
The August jobs report will come out on September 6. For inflation data, the next two dates to circle are August 14 and 30, when the July consumer price index and personal consumption expenditures price index, respectively, will be published. Officials will also get a look at the August CPI on September 11, before the Federal Open Market Committee meets the following week, on September 17-18. August PCE data won’t be available until September 27.
Markets reacted strongly to Friday’s jobs data, pricing in significantly more interest-rate cuts by the Fed in the coming months. Interest-rate futures market pricing called for the Fed to lower rates by a cumulative percentage point over its next three meetings before the end of 2024.
“If cuts are due to cooling inflation, we expect a gradual decline in rates,” wrote Mike Sanders, head of fixed income at Madison Investments. “However, this weak jobs report heightens the risk of cuts in response to labor market conditions, potentially leading to a more aggressive Fed stance.”