The United States economy experienced a lower-than-expected job creation rate, coupled with an increase in the unemployment rate. This suggests a potential slowdown in the labor market, coinciding with the possibility of the Federal Reserve considering interest rate cuts.
The unemployment rate rose from 4.1 percent to 4.3 percent, surpassing economists’ expectations of 4.1 percent. This represents the highest jobless rate since October 2021.
Average hourly earnings witnessed a smaller-than-projected growth rate of 3.6 percent year-over-year. On a monthly basis, average hourly earnings showed a slight increase of 0.2 percent.
The labor force participation rate saw a marginal increase from 62.6 percent to 62.7 percent. Simultaneously, average weekly hours declined from 34.3 to 34.2.
The healthcare sector contributed significantly to job growth, with the addition of 55,000 new positions last month. This was followed by construction (25,000) and government (17,000).
The information sector witnessed a reduction of 20,000 jobs, while manufacturing payrolls remained relatively unchanged.
The job numbers for May and June were revised downwards by 2,000 and 27,000, respectively.
In addition, the household portion of the monthly jobs report, which eliminates duplicate entries, indicated the creation of 67,000 new jobs in the economy.
The number of people working in two or more jobs surged to 8.473 million, up from 8.34 million. Full-time employment increased by 448,000, whereas part-time employment decreased by 325,000.
U.S. Treasury yields exhibited a decline across the board, with the benchmark 10-year yield dropping below 3.82 percent. The 2-year yield also fell below 4 percent, while the 30-year bond tumbled to 4.16 percent.
The U.S. Dollar Index (DXY), which gauges the value of the dollar against a basket of currencies, experienced a significant decline below 104.00.
“The job market is showing signs of weakening after the disappointing payroll growth and the rise in the unemployment rate,” stated Byron Anderson, the head of fixed income at Laffer Tengler Investments.
“We can expect the Federal Reserve to move away from their data-dependent approach, particularly if the labor data continues to deteriorate prior to their next meeting. The Fed will likely embark on economic protection measures to stabilize markets. Rate cuts should be introduced in the near future, and the bond market is currently positioned for a downward trajectory,” Anderson expressed in an email to media outlets.
While investors anticipate a rate cut at the September policy meeting, traders are discussing the magnitude of the Federal Reserve’s initial pivot.
Job quits witnessed a significant decline to 3.282 million, marking the lowest level since November 2020.
Furthermore, annual pay increases for job-stayers reached a three-year low of 4.8 percent, while pay gains for job changers experienced a decrease to 7.2 percent.
Indeed, data from the Bureau of Labor Statistics (BLS) reveals a slowdown in wage gains. In the second quarter, the Employment Cost Index (ECI), a comprehensive measure of employee compensation, increased at a slower pace than anticipated, growing by 0.9 percent compared to 1.2 percent in the first quarter.
Unit labor costs also experienced a slower growth rate of 0.9 percent during the April-June period, falling short of the consensus forecast of 1.8 percent.
In terms of job losses, the technology sector witnessed 6,009 layoffs, while the services sector saw 2,932 job cuts.
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