Non-farm pay growth in July was slower than expected, with unemployment rates still on the rise, and President Donald Trump increased tariffs, increasing signs of potential trouble in the US labor market.
Employment growth was above the June total of 14,000, a seasonally adjusted total of 73,000 for the month, but even a small Dow Jones estimate for a profit of 100,000 was below, the Labor Bureau of Statistics reported Friday. The June and May totals fell sharply, down from previously announced levels at a total of 258,000.
At the same time, the unemployment rate rose to 4.2%, in line with forecasts.
June totals fell from the aforementioned 147,000, but May numbers fell to just 19,000, down to 125,000.
Stock market futures fell further after the news, but Treasury yields also fell significantly.
“This is the GameChanger employment report,” said Heatherlong, chief economist for the Navy Federal Credit Union. “The labor market is rapidly deteriorating.”
The weak reports, including dramatic revisions, could provide an incentive for the Federal Reserve to lower interest rates the next time they meet in September. Following the report, Futures Traders increased the chances of a cut at the meeting to 75.5% from 40% on Thursday, according to CME Group Data.
“This is the slowdown we were hoping for,” said Luke Tilly, chief economist at the Wilmington Trust. “Companies face a very different cost structure. They need to adapt to the new cost structure, meaning they refrain from hiring.”
There were few signs of strength in the July job count. It mainly benefited from healthcare. This is a sector that continues to show strength in post-Covid recovery. The group led easily, adding 55,000 jobs. Social assistance also contributed 18,000 jobs. The two sectors combined about 94% of employment growth.
Retailers added about 16,000 jobs, while the financial sector increased by 15,000.
However, federal employment continued to decline, with the month falling by 12,000 and 84,000 since its peak in January. Professional and business services have lost 14,000.
“In many ways, this is about slowing down, and the test we have now is to really figure out how long this slowing goes on and how it could lead us into a more awkward position,” Atlanta President Rafael Boschtic said of CNBC. “But we don’t know that now, and that’s what I will be working on over the next two months,” before the Fed’s September meeting.
Bostic will not vote for the Federal Open Market Committee this year, but can provide opinions at the meeting. He previously said he will support one cut this year.
In wages, average hourly revenues increased by 0.3%, meeting estimates, but annual profits of 3.9% were slightly higher than expected.
The household survey used to compil the unemployment rate was even worse than the total salary establishment survey. This reduced 260,000 workers and reduced participation rate to 62.2%, the lowest since November 2022.
More comprehensive unemployment indicators, including discouraged workers and workers who hold part-time positions for economic reasons, rose to 7.9%, the highest since March.
Furthermore, long-term unemployment has become hotter. The average week jumped to 24.1, the highest level since April 2022, but the level of work over 27 weeks has been the highest since December 2021, rising to about a quarter of all unemployed people.
“Today’s report adds weight to signs of slow but sustained cooling trends. The labor market is not in crisis, but hiring momentum continues to ease and pressure is beginning to build up.”
The report includes questions about the company’s desire to be ready in the face of ongoing trade negotiations and escalating tariffs.
President Donald Trump has actively requested low interest rates from the Fed. However, the central bank on Wednesday again voted to secure its first major borrowing level since December, despite intense criticism from the president.
White House officials highlighted the uncertainty over tariff negotiations and the shift to a picture of work that emerged from the administration’s crackdown on illegal border crossings.
“It’s true… there are some elements of this report that we don’t think we wanted. I don’t think anyone really wanted for the US economy,” the chair of the Economic Advisors Council said in an interview with CNBC. “But there’s a very strong policy to take things from the trade contracts, from the tax bills, from here.”
Trump released another angry post on true social Friday morning, appearing to be calling on the rate setting federal open market committee to overturn Chairman Jerome Powell.
“The stubborn idiot Jerome “too late” Powell now has to cut interest rates significantly. If he continues to refuse, the board should assume control and do what everyone has to do! ” Trump posted. Following the employment report, Trump posted again, calling Powell a “disaster.”
There are concerns about where the labour market is heading, but the top line economic numbers are still ongoing.
Gross domestic product rose at a 3% per year in the second quarter, significantly better than expected. But that primarily reflects the rewind of huge import accumulation ahead of Trump’s April 2nd release of “liberation day” tariffs. The number of demand underlying the Commerce Department’s report was largely weak, but consumer spending has risen since the first quarter, but still lukewarm.
