US hiring slows in July as unemployment dips

Employers added 187,000 jobs last month as unemployment fell to 3.5 per cent

A 'We Want You!' sign outside a sandwich shop in Los Angeles, California. AFP
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US hiring slowed further in July, although it showed continued momentum to boost hopes that the Federal Reserve can slow economic growth without creating a downturn.

Non-farm payrolls increased by 187,000 last month, data released on Friday by the Labour Department showed, the lowest job gains since December 2020. Job growth for June was revised down to 185,000.

The unemployment rate was unchanged at 3.5 per cent. A Reuters survey of economists had anticipated an increase of 200,000 jobs and an unemployment rate of 3.6 per cent.

Hourly earnings increased by 0.4 per cent in July, unchanged from June. Over the past 12 months, hourly earnings have increased by an average of 4.4 per cent.

Bank of America became the first bank on Wall Street to revise its end-of-year predictions, now believing that the US will avoid a recession. Instead hopes are turning towards a so-called soft landing, the Fed's ideal scenario in which its high interest rates slow economic growth without creating a downturn.

Consumers also have a more positive outlook on the economy. Consumer confidence hit a two-year high last month based on easing recession fears and the strength of the labour market.

In another sign of evidence of a cooling labour market, the Labour Department reported this week that job openings fell to their lowest level in two years. There remain 1.6 jobs available for every jobseeker, down from 1.9 earlier this year.

Still, wage growth and a near-historic-low unemployment rate shows that the labour market is probably too tight for the Fed's liking.

The jobs market has been a particular challenge in the Fed's attempts to rein in inflation, currently at 3 per cent.

Speaking to reporters after raising interest rates to a 22-year high last month, Fed Chair Jerome Powell said the central bank is not seeking to raise unemployment but that history suggests it is the likely outcome.

Updated: August 04, 2023, 1:21 PM