Official figures indicate that the US economy is experiencing a weaker summer for employment than previously anticipated. In a surprise development, the nation saw a loss of 23,000 jobs last month, contradicting analyst forecasts that had predicted an increase of 80,000 new roles.
The Bureau of Labor Statistics reported that these declines were primarily driven by reductions in retail positions—including those at gas stations, hypermarkets, wholesale stores, and general merchandise shops—alongside cuts in local government education. Furthermore, the agency revised downward the job growth figures for May and June by a combined 103,000, underscoring a broader trend of sluggish hiring throughout the summer.
Despite the contraction in payrolls, the unemployment rate unexpectedly dipped from 4.2% to 4.1%. This shift occurred as the total number of individuals either employed or actively seeking work saw a slight decline. Meanwhile, average hourly earnings for private non-farm payroll employees reached $37.62, reflecting a 3.2% annual increase, which fell short of the 3.5% growth economists had projected.
Market reaction was positive, with US stock markets opening higher on Friday. Investors appear optimistic that the softer economic data may alleviate pressure on the Federal Reserve to implement interest rate hikes next month, even as inflation remains a concern. Nancy Vanden Houten, lead economist at Oxford Economics, noted that expectations for such rate increases have been “scaled back” since last month’s policy decision.
Neil Birrell, chief investment officer at Premier Miton, acknowledged that while July payrolls are often softer, the current market weakness is “by some distance” more pronounced. He highlighted that labor force participation has regressed to levels not observed since the Covid-19 pandemic, suggesting a fundamental lack of job creation.
Looking ahead, Birrell emphasized the difficult position facing the central bank. “This does leave the Fed with the problem of a weak jobs market providing a read across to growth, all at a time when inflation is a problem, but this data will ease the pressure to hike rates. It’s a big call in September,” he stated.
Analysts had expected an uptick in the number of jobs being added to the economy last month of 80,000, as opposed to a loss of 23,000.
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