US employers added 187,000 jobs in July, the lowest number since COVID peaked in 2020, the Labor Department said Friday.
The latest figures shown in the Bureau of Labor Statistics’ July report, released Friday, are a key indicator that the red-hot labor market is officially cooling after nearly 18 months of interest rate hikes — part of the Federal Reserve’s aggressive tightening cycle to bring inflation back down to its pre-pandemic level of 2%.
Job openings last month mark a slight decrease from the 209,000 jobs added to the US economy in June, and a sharper drop from the robust 339,000 jobs that were gained in May.
The figures mark the slowest increase since December 2020, though the US is currently enjoying a 30-month streak of monthly job gains.
The government agency’s report also showed that unemployment was little changed month-over-month, to 3.5% from 3.6%.
Employment in healthcare added 63,000 jobs last month, increasing the most.
Jobs in construction, financial activities and wholesale trade also trended positively, the report showed.
Fed officials have warned that strong hiring can often fuel inflation if companies feel compelled to raise pay to attract and keep workers.
Thus, a slowdown in job growth and pay raises could help the Fed reach its 2% inflation target.
The Fed last week hiked interest rates to a 22-year high — to a range between 5.25% and 5.5% — and Powell suggested that further lifts could be imminent if officials though it were necessary to combat stubbornly-high inflation.
Friday’s report came in under what economists had expected.
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They had forecast 200,000 new jobs in June with the unemployment rate holding steady at 3.6%, according to The Wall Street Journal.
Experts have long been forecasting that the jobs market would cool by the fourth quarter of the year, though bankers are shrugging off recession concerns as US consumers have reportedly been keeping up their loan payments.
JPMorgan chief Jamie Dimon said in an earnings conference call last month: “Even if we go into recession, they’re going with rather good condition, with low borrowings and good house price value still.”
Bank of America CFO Alastair Borthwick also said that “the consumer’s actually in pretty good shape,” citing elevated deposits and strong asset quality.
Powell has also said that Fed staff is no longer forecasting a recession.
“We do have a shot” for inflation to return to target without high levels of job losses, the Fed Chairman said.
However, when ratings agency Fitch shockingly downgraded the US’ top-tier sovereign credit rating from AAA to AA+ earlier this week, it pointed to a looming recession by the end of the year as reason for doing so.
The agency noted that it expects the US economy to slip into a mild recession from the fourth quarter of this year into the first quarter of 2024.
“Tighter credit conditions, weakening business investment and a slowdown in consumption will push the US economy into a mild recession,” Fitch said in the statement.
Fitch’s decision was bashed among top economists, with the likes of Former Treasury Secretary Larry Summers and CUNY economics professor Paul Krugman both calling the move “bizarre.”
