In last week’s news, US payrolls grew by 187,000 in July and the jobless rate fell to 3.5%. This sets up the US economy in a nice balance – not too hot, not too cold. Healthcare and social assistance added 87,100 jobs in July, accounting for the majority of all private-sector gains. Healthcare employment grew strongly this year but would be even higher if it followed pre-pandemic trends.
With July’s numbers in, the US has posted its two weakest months of job growth in two-and-a-half years. Non-farm payrolls rose by 187,000 in July and a revised 185,000 in June. By comparison, employers added an average of 399,000 jobs a month in 2022 and 287,000 a month through the first five months of this year.
US non-farm payrolls
Source: Trading Economics
The slowdown in hiring reflects a cooling economy, a welcome development for the Federal Reserve (Fed) which has been working hard to get inflation down. Other metrics suggest that there is still demand for workers, and private sector pay in July rose 4.4% from a year earlier, still well above pre-pandemic levels.
The unemployment rate ticked lower to 3.5% (from 3.6%) and has been hovering near 50-year lows. Part of the reason is that the labour force isn’t growing very quickly: the participation rate, the share of the working-age population that is working or looking for work, came in at 62.6% for the fifth straight month. The flat participation rate suggests an ageing population – baby boomers are retiring. It appears that the labour market is coming into balance, but perhaps it isn’t all the way there yet.
The Fed’s next meeting on 19-20 September will follow August’s job data and monthly inflation figures, so a negative surprise that might force the Fed to raise once more is still possible. But this is starting to look increasingly unlikely. Perhaps this explains why Wall Street has been so robust in the past few weeks – the much-hoped-for soft landing could be coming into view.
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