US employers added 187,000 jobs in July, less than expected and a sign that the labor market is cooling after a series of interest rate hikes by the Federal Reserve have driven rates to their highest level in 22 years.
The jobs market has continued to add at least 200,000 new jobs each month this year, according to the US Bureau of Labor Statistics (BLS). But that compares to an average monthly gain of 400,000 in 2022.
July’s gains were just 2,000 more than the jobs added in June. The BLS revised June’s job gain down to 185,000, a cut of 24,000 jobs. It also cut May’s jobs number. Together, June and July represent the two weakest monthly gains in two and a half years.
While the jobs market remains robust, July’s gains represent a considerable dip compared to January of this year, when 472,000 jobs were added. The unemployment rate has remained stable at 3.5%, the same rate seen in June and close to the historically low rates seen before 2020.
Healthcare and social assistance accounted for the most new positions in July, adding 87,000 new jobs. The government added 15,000 new jobs.
Black unemployment had risen for the last two months, often a sign of trouble ahead. The rate dipped in July from 6% to 5.8% – still far higher than the 3.1% unemployment rate for White Americans.
Wage gains continued to outpace inflation – rising 4.5% from April to June compared to a year ago. But the pace of rises slowed from 4.8% in the previous quarter.
Angela Hanks, chief of programs at Demos and former acting assistant secretary at the Department of Labor, said the figures showed the job market remained “resilient overall”.
“We saw in June that wages were finally beginning to outpace inflation, and this month’s report shows that trend continues. Which means that people are actually getting to feel those wage gains,” she said.
But she said there was Black unemployment rate was still troubling. “It remains nearly double the white unemployment rate, and above the historic lows it hit earlier this year. There’s still room to improve on this front, and this remains the number to watch in subsequent reports.”
July’s job figures, along with these other economic indicators, suggest that the Fed may be able to pull off a “soft landing” – bringing down inflation without causing a recession, as some economists expected to happen as soon as later this year. In June, the annual rate of inflation reached a two-year low at 3%, three times lower than it was a year prior.
Many economists are expecting the Fed to stop its rate hikes soon as it allows the economy to stabilize. That job figures have continued to be strong represents a sign of the resilience of the economy, but the economy may not fully yet have fully responded to the impact of high rates.
“We’ve covered a lot of ground, and the full effects of our tightening have yet to be felt,” Fed chair Jerome Powell said after the interest rate hikes were announced. As Powell has said over the last year, he also said that getting inflation to the Fed’s target of 2% “has a long way to go”.
Hanks warned the Fed’s actions could still harm the economy. “While these numbers are positive, there’s still reason to worry that the Fed’s actions – including resuming rate hikes in July – could have a negative impact on the labor market. While the Fed is no longer predicting a recession, its own actions could continue to threaten one,” she said.