New Delhi: The U.S. labor market delivered a fresh warning sign in July, with payrolls falling unexpectedly and previous job gains sharply revised lower, complicating the Federal Reserve’s next interest-rate decision.
Economists had forecast an increase of 80,000 jobs. Instead, payrolls declined by 23,000, marking the first monthly contraction in five months.
Data for May and June was also revised down, with the economy now estimated to have added 103,000 fewer jobs than previously reported.
Average job growth over the past three months has fallen to just 20,000 a month, compared with 77,000 in the three months through June.
The weakness was broad-based. Wage growth slowed to 3.2% year-on-year from 3.4% in June, while the labor force participation rate fell to 61.4%, its lowest level in about five and a half years. The unemployment rate edged down to 4.1% from 4.2%, but that decline was partly driven by 264,000 people leaving the labor force.
READ: UPI will be free, but here’s biggest worry of Payments Council of India
Several sectors reported job losses. Local government education jobs fell by about 49,600, leisure and hospitality lost 40,000, retail employment declined by roughly 19,400 and financial activities shed 14,000 jobs. Healthcare and construction each added about 22,000 jobs.
Economists cautioned that some of the decline in education employment could reflect seasonal adjustments and should not automatically be interpreted as a sign of an economic collapse.
The report nevertheless leaves the Fed facing conflicting signals. A weakening labor market could support lower rates, while inflation remains above the central bank’s 2% target, arguing for a cautious approach.
The Fed’s benchmark rate currently stands at 3.5%-3.7%. Markets had been pricing in a September rate hike, but the probability fell to around 44% after the jobs report.
READ: Explained: Why FCRA is at Centre of Political Debates?
Next week’s inflation data could prove decisive. A cooling inflation reading could strengthen the case for holding or cutting rates, while persistent price pressures may keep the Fed focused on inflation despite the weakening labor market.
Follow NewsEdition.in on X (Twitter) and LinkedIn for more stories on politics, the world, business, and more.
Comments (0)
Be the first to comment!