The US economy shed 23,000 jobs in July, a surprise decline that ran counter to analyst forecasts of an 80,000 gain and provided fresh evidence that the summer labour market is weaker than previously thought, according to data from the Bureau of Labor Statistics (BLS) reported by the BBC. The unemployment rate held steady at 4.1%, according to the BLS.
Payrolls post surprise loss in July
The July decline was driven by cuts in local government education and retail roles, the BBC reported. Declines also appeared in:
- Warehouse clubs and hypermarkets
- Gas stations
- General merchandise sellers
Analysts had expected net job creation of 80,000 for the month, according to the BBC, making the 23,000-loss a swing of more than 100,000 against consensus.
The softness extended beyond the single month: the BLS revised down combined job gains for May and June by 103,000, a downward adjustment that signals "a slow summer of job creation," as the BBC described it. July payrolls do tend to be softer, the BBC noted, but Neil Birrell, chief investment officer at Premier Miton, said the US jobs market was weaker "by some distance."
| Indicator | Figure |
|---|---|
| July change in non-farm payrolls | -23,000 jobs |
| Analyst consensus forecast | +80,000 jobs |
| May–June combined downward revision | -103,000 jobs |
| Unemployment rate | 4.1% |
A September test for the Federal Reserve
The weak employment figures raise questions about what the Federal Reserve will decide to do with interest rates next month, the BBC reported. The central bank has kept rates on hold for all of this year. Birrell said the July data "will ease the pressure to hike rates" even though inflation remains a problem.
"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." — Neil Birrell, chief investment officer, Premier Miton
Participation returns to Covid-era levels
Birrell said labour force participation offered the clearest sign of the slowdown.
"Labour force participation is back at levels not seen since the days of Covid, meaning jobs just aren't being created."
The downward revisions, the monthly payrolls decline and tepid participation point to a US jobs market losing momentum just as the Federal Reserve prepares for its September policy meeting, where the central bank faces what Birrell called "a big call" on rates. The next milestone for investors is the Fed's rate decision next month.
Sources:
