The Labor Department released a highly anticipated report on Friday, revealing that U.S. employment growth in July was significantly lower than projected.
According to the report, non-farm payroll employment increased by 114,000 jobs in July, following a revised downward increase of 179,000 jobs in June. Economists had predicted a rise of 175,000 jobs, compared to the initially reported surge of 206,000 jobs for the previous month.
The underwhelming job growth was attributed to continued increases in employment in the healthcare, construction, and transportation and warehousing sectors, which were partially offset by job losses in the information sector.
Furthermore, the Labor Department reported that the unemployment rate climbed to 4.3 percent in July, up from 4.1 percent in June. Economists had anticipated the unemployment rate to hold steady. This unexpected rise pushed the unemployment rate to its highest level since October 2021, when it was at 4.5 percent.
The increase in the unemployment rate occurred as the workforce expanded by 420,000 individuals, compared to a 67,000 increase recorded in the household survey measure of employment.
"After this morning's jobs report, the Fed should have buyer's remorse about its decision to leave rates unchanged on Wednesday," stated FHN Financial chief economist Chris Low. "The unemployment rate is now higher than the level the Fed considers consistent with full employment." He added, "This is just one report, and it could have been affected by Hurricane Beryl despite the lack of overt evidence. But this release is not anomalous. The pace of labor market cooling has accelerated since March."
Meanwhile, the report noted a modest increase in average hourly earnings, which rose by $0.08 or 0.2 percent to $35.07. However, the annual wage growth rate slowed to 3.6 percent in July, down from 3.8 percent in June.
