Economists have worried that a weaker showing in the jobs report could signal the beginning of a downturn.
“Today’s jobs report is disappointing on all fronts,” said Eric Merlis, co-head of global markets at Citizens Bank, in an analyst note. He added that “the jobs report solidifies the case” for the Federal Reserve to cut interest rates soon.
Wage growth also slowed considerably in July, increasing by 0.2 percent from the previous month and by 3.6 percent in the past year, providing evidence that pay gains are not fueling inflation. That’s the slowest growth since May 2021.
In another sign of cooling that economists have monitored closely, the average length of the workweek for private employees fell to 34.2 hours, matching the lowest level in more than a decade.
Employers added the most jobs in health care, construction, transportation and warehousing, and government. The health-care sector led the gains, adding 55,000 jobs in July, and has buoyed the labor market as other industries have sputtered, due to high demand from an aging population.
Construction added 25,000 jobs in July, reflecting remarkable resilience. Most jobs were added among specialty trade contractors.
Transportation and warehouse added 14,000 jobs, after hitting a recent low in January — a recalibration after a massive expansion during the e-commerce boom of the pandemic days. Most of July’s job gains were in delivery and storage.
Nearly all other major private industries barely grew last month, and some shrank. The information sector, which includes some tech jobs, lost 20,000 jobs in July, as higher interest rates have brought hiring to a halt. Manufacturing, financial services, wholesale trade, professional and business services, and leisure and hospitality added little or no jobs in July.
There are other signs the labor market is softer: Employers are hiring at the slowest pace in a decade, excluding the pandemic shutdown; job openings have slowed considerably, though they remain higher than before the pandemic; and workers are not switching jobs as much.
Top policymakers at the Federal Reserve have taken note of the slower labor market, indicating that a September rate cut is possible, after two years of high interest rates have curbed inflation but have weighed on the broader economy and, increasingly, jobs.
“The jobs market went from tapping the brakes to leaving skid marks,” said Robert Frick, an economist at Navy Federal Credit Union, in an analyst note. “This should lock in not only a September rate cut, but perhaps a deeper cut in September and accelerate the schedule of cuts this year and next.”
Job growth in leisure and hospitality, which fueled the post-pandemic labor market boom, has sputtered, adding 23,000 jobs in July. Restaurant owners have been grappling with the higher costs of labor and borrowing required to expand.
That’s hurting Black, Hispanic and young workers, who are disproportionately represented in some lower-wage sectors, contributing to a rise in their unemployment rates over the past year, said Julia Pollak, chief economist at ZipRecruiter.
These conditions have made it more difficult for workers across the private sector to find jobs, contributing to their gloomy outlook about the economy.
Jordan Arias, 29, a mother of two in Morris County, N.J., lost her job in January 2023. She has struggled to find work in the nonprofit sector, where she previously worked, applying to at least 100 jobs without luck, she said. She’s focusing her job search within the nonprofit sector, but competing with applicants with master’s degrees while she has only a bachelor’s has hurt her prospects, Arias said, calling the job hunt “terrible” and “grueling.”
“I’ve had trouble making ends meet,” Arias she said. “I’ve really depended on my family. My house is running bare-bones. We have WiFi, and that’s it. For my kids, they usually have robust summers at water parks and the beach. I feel bad for them, because we haven’t done any of that.”