U.S. Nonfarm Payrolls Increase by 187,000 in July; Unemployment Rate Falls to 3.5%
WASHINGTON, Aug 4 (Reuters) – The U.S. economy added fewer jobs than expected in July, with nonfarm payrolls increasing by 187,000, according to the Labor Department’s employment report released on Friday. This figure fell short of economists’ expectations of a gain of 200,000 jobs. However, the report also showed solid wage gains and a decline in the unemployment rate to 3.5% from 3.6%, indicating continued tightness in the labor market.
While the job gains in May and June were revised lower, potentially suggesting a slowdown in labor demand following the Federal Reserve’s interest rate hikes, the data also points to a potential labor supply issue. In June, there were 1.6 job openings for every unemployed person, indicating that companies may be struggling to find workers.
Economists believe that despite the mixed report, the Federal Reserve could still engineer a “soft landing” for the economy. However, much will depend on the direction of inflation after a sharp slowdown in price increases in June.
“There are many signs that we’re on the path to a ‘soft landing,’ but that path can also lead us to a sustained downturn if we miss the exit to a sustainable and strong labor market,” said Nick Bunker, head of economic research at the Indeed Hiring Lab. “We haven’t approached that fork in the road yet, but there is still a strong possibility that the labor market can rebalance without a recession.”
The average workweek dipped slightly to 34.3 hours from 34.4 hours, while average hourly earnings rose by 0.4%, bringing the year-on-year increase to 4.4%. This wage growth is higher than the Fed’s 2% inflation target, but economists do not believe that it alone justifies another rate hike this year.
Despite the slower job growth in July, certain sectors saw gains. The healthcare sector added 63,000 jobs, financial activities payrolls rose by 19,000, and the construction sector increased employment by 19,000. However, professional and business services employment decreased by 8,000 jobs, and manufacturing shed 2,000 jobs.
Stocks on Wall Street traded higher following the release of the report, while the dollar was lower against a basket of currencies. U.S. Treasury yields also fell.
Overall, while job growth fell short of expectations in July, the decline in the unemployment rate and solid wage gains indicate a continuing tight labor market. Economists believe that the Federal Reserve could still navigate a “soft landing” for the economy, but caution that the path ahead depends on inflation trends and labor market conditions.