In July, the United States witnessed an addition of 187,000 jobs, falling short of expectations and indicating a cooling labor market. This deceleration follows a series of interest rate hikes by the Federal Reserve, which have propelled rates to their highest level in 22 years.
Throughout this year, the jobs market consistently gained at least 200,000 new jobs each month, as reported by the US Bureau of Labor Statistics (BLS). However, this contrasts with an average monthly increase of 400,000 jobs observed in 2022.
The increase in July’s employment figures amounted to a mere 2,000 jobs more than those added in June. Notably, the BLS revised June’s job addition downward to 185,000, marking a reduction of 24,000 jobs. May’s job numbers were also revised downwards. Combined, the gains in June and July represent the two weakest monthly increments over a span of two and a half years.
While the jobs market maintains its robustness, the gains seen in July constitute a significant dip when compared to January of the same year, which saw the addition of 472,000 jobs. The unemployment rate has remained steady at 3.5%, matching the rate observed in June and nearing the historically low rates prior to 2020.
The healthcare and social assistance sectors accounted for the highest number of new positions in July, adding 87,000 jobs. Additionally, the government added 15,000 jobs.
Black unemployment, which had risen over the previous two months, experienced a decline in July from 6% to 5.8%. Nonetheless, this rate remains notably higher than the 3.1% unemployment rate among White Americans.
Wage gains continued to surpass inflation, rising by 4.5% from April to June in comparison to the previous year. However, this pace of increase slowed from the 4.8% witnessed in the previous quarter.
Angela Hanks, the chief of programs at Demos and former acting assistant secretary at the Department of Labour, noted that the job market exhibited resilience overall. She highlighted the positive trend of wages outpacing inflation, thereby allowing individuals to tangibly experience these wage gains.
Yet, she expressed concern over the elevated Black unemployment rate. While acknowledging improvements, Hanks emphasised the significance of further progress in this aspect.
July’s employment data, combined with other economic indicators, suggest that the Federal Reserve might be able to execute a “soft landing,” a scenario in which inflation is reduced without triggering a recession. This contrasts with earlier concerns among economists that a recession could be imminent, potentially later this year. In June, the annual inflation rate reached a two-year low of 3%, a stark reduction from the previous year’s rate.
Many economists anticipate the Federal Reserve to conclude its rate hikes soon as it seeks to stabilise the economy. The continuous strength observed in job figures signifies the economy’s resilience. However, it is possible that the full impact of the heightened rates has not yet fully manifested in the economy.
Federal Reserve Chair Jerome Powell remarked that the effects of the tightening measures have yet to be fully realised. Despite the progress made, achieving the Fed’s target inflation rate of 2% is an ongoing endeavour.
Hanks cautioned that the Federal Reserve’s actions could still have adverse effects on the economy. While acknowledging the positive aspects of the data, she emphasised the potential risks posed by the Fed’s actions, including the resumption of rate hikes in July. These actions, she noted, could potentially continue to pose a threat to the economy, even though a recession is no longer predicted by the Fed.
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