American employers reined in their hiring significantly in July, intensifying jitters that the economy is cooling faster than expected.
Payrolls grew by 114,000, the Labor Department reported on Friday, the second smallest gain in a 43-month period of consistent job growth. The unemployment rate rose to 4.3%, the highest level since October 2021, when anxiety about the pandemic was still elevated.
The report added to worries that Federal Reserve officials, who have been holding off on cutting interest rates until they see more data that indicates inflation is coming under control, may have waited too long, potentially sending the labor market into a hard-to-arrest downward spiral. Fed policymakers left the benchmark interest rate at 5.3% at their meeting this week but suggested that a rate cut could be on the table at their next gathering, in mid-September.
“I’m not pushing the panic button at this point,” said Robert Frick, the corporate economist at the Navy Federal Credit Union. “But it is a cause for concern, and it certainly indicates the Fed is behind the curve in cutting rates.”
Wage growth decelerated in July, with average hourly earnings up 0.2% from the previous month and 3.6% from a year earlier. The number of people working part time who would have preferred full-time employment also increased, while the number of hours worked per week ticked down slightly, both signals that the demand for workers is slackening.
Further underscoring weakness in the report, job growth was concentrated in a handful of sectors, including health care and social assistance, and construction, which has been surprisingly resilient despite high interest rates. Government employment, which had been helping to drive recent job gains, also increased, though at a slower pace than earlier this year.
But many other industries were largely flat or lost employment, including the information sector, which cut 20,000 jobs.
Overall, the private sector added fewer than 100,000 jobs. The total payroll figures for May and June were also revised lower by 29,000 jobs, bringing the labor market’s steady slowdown into sharper focus.
This article originally appeared in The New York Times.
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