Over the past two and a half years, the U.S. economy has created more than 200,000 jobs on average in each month. Now this dynamic has broken. The labor market added 187,000 employed in July, a figure that shows a slowdown. This amount is also below forecasts, which maintained the level of 200,000.
Nevertheless, it is an improvement over June, since the revision made now leaves the increase for that month at 185,000 (24,000 less), while in May, once the data was revised, there were 281,000 hirings, 25,000 less than what was said back in the day. “The data continues to show us that we’re not in a recession, not even close,” said Callie Cox, US investment analyst at eToro.
By sector, the health care, social assistance and financial services industries led job gains in July, with numbers ranging from 63,000 to 19,000 new jobs. Leisure and hospitality, the drivers of the labor market until now after the impact of the pandemic, added 17,000 jobs, in a clear slowdown if compared to the 67,000 monthly average in the first quarter of 2023.
Although the labor market shows a healthy level, the more modest increases in June and July are a clear reflection of the restrictive monetary policy of the Federal Reserve (Fed), which has been increasing interest rates for a year and a half to contain inflation and weaken economic momentum.
The paradox is that the unemployment rate in the US continues to fall. Specifically, from 3.6% to 3.5%, close to historical lows, a level practically identical to that of 1969, the period before all the great crises after the Second World War. There is more supply than demand. For every job seeker, there are 1.6 open jobs.
Average wages, a key element for the Fed to regulate the price of money because greater consumer spending power can heat up prices, rose four-tenths, putting the annual pace at 4, 4% Both percentages were higher than had been forecast, at 0.3% and 4.2%, respectively. Another relevant number, the employment rate remained at 62.6% for the fifth consecutive month. “Wage growth has been stagnant above 4% for several months. Wages grow more than prices; good news for your pockets. But strong wage growth could revive fears about inflation,” says Cox.
The markets, once they heard the news, remained flat, with no notable movements in the face of these numbers that reflect a mixed picture when it comes to clarifying the Fed’s next decisions: few jobs are created, but unemployment continues low and wages go up. These last two elements could make Jerome Powell doubt. And delay even more the victory song against inflation.
