Top Points:
Rising Unemployment Rate: The U.S. unemployment rate increased to 4.3% in July, the highest since October 2021, reflecting a weakening labor market under President Biden's administration.
Disappointing Job Creation: The economy added only 114,000 new jobs in July, significantly below expectations and a sharp decline from June’s 179,000, indicating potential economic stagnation.
Market Reaction: Financial markets reacted negatively, with major indexes dropping by up to 2%, and U.S. Treasury yields falling across the board, as investors anticipate potential Federal Reserve rate cuts to stabilize the economy.
Full Report:
Job Market Shows Signs of Weakness as Biden's Policies Face Scrutiny
The U.S. job market is signaling trouble, creating fewer jobs than anticipated while the unemployment rate climbs. The latest figures from the Bureau of Labor Statistics (BLS) reveal a decelerating labor market, adding pressure on the Federal Reserve, which might soon be forced to cut interest rates.
Disappointing Job Creation and Rising Unemployment
In July, the economy generated just 114,000 new jobs, a sharp decline from June’s 179,000 and well below the expected 175,000. The unemployment rate increased to 4.3%, up from 4.1%, marking the highest rate since October 2021. This rise is above economists’ forecasts and reflects a troubling trend.
Stagnant Wage Growth and Labor Participation
Average hourly earnings growth slowed to 3.6% year-over-year, with a modest monthly increase of 0.2%. The labor force participation rate edged up slightly to 62.7%. However, average weekly hours declined to 34.2, signaling reduced working hours for many employees.
Sector-Specific Job Trends
The health care sector led job creation with 55,000 new positions, followed by construction (25,000) and government jobs (17,000). Conversely, the information sector lost 20,000 jobs, and manufacturing showed little change.
Revised Job Numbers and Employment Composition
May and June’s job numbers were revised down by 2,000 and 27,000, respectively. The household portion of the report, which eliminates duplication, reported 67,000 new jobs. Notably, the number of people holding multiple jobs surged to 8.473 million.
Native vs. Foreign-Born Workers
A significant shift in employment trends emerged, with U.S.-born workers decreasing by over 1.2 million since July 2023, while foreign-born workers increased by approximately 1.3 million, highlighting a growing divide.
Market Reaction and Economic Outlook
Financial markets reacted negatively to the employment data. Major indexes dropped by up to 2% in pre-market trading. U.S. Treasury yields fell across the board, with the 10-year yield dropping below 3.82%, the 2-year yield below 4%, and the 30-year bond at 4.16%. The U.S. Dollar Index (DXY) also fell below 104.00.
Byron Anderson, head of fixed income at Laffer Tengler Investments, commented, “The Fed narrative of data-dependent should be done moving forward, especially if the labor data continues to fall before the next Fed meeting.” Anderson anticipates rate cuts to stabilize the markets soon.
Broader Labor Data Context
The July jobs report follows a week of mixed labor data. Job openings slightly decreased to 8.184 million in June, while job quits fell to their lowest since November 2020. Private businesses added 122,000 jobs in July, below expectations. Wage growth for job-stayers and job-changers also slowed.
Despite wage growth abating, the employment cost index (ECI) and unit labor costs rose less than expected, reflecting a cooling job market. Additionally, U.S. companies announced fewer job cuts in July, with the tech and services sectors leading layoffs.
Initial jobless claims rose to 249,000 for the week ending July 27, higher than expected, while continuing claims also increased.
Original Story by Andrew Moran, The Epoch Times
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