July’s employment report shows that 187,000 jobs were added to the U.S. economy. This job growth is less than expected, according to the U.S. Department of Labor. Nonfarm payrolls expanded by 187,000 for the month, slightly below the Dow Jones estimate of 200,000. The unemployment rate edged down from 3.6% to 3.5%, according to the U.S. Bureau of Labor Statistics.
Many economists expected a gain of at least 200,000 jobs in July. According to Axios, the data shows the labor market added roughly the same number of jobs as in June when a downwardly revised 185,000 jobs were added. And in May, the economy added 281,000 jobs, which was revised down by 25,000.
Source: U.S. Bureau of Labor Statistics
The labor force participation rate in July 2023 was 62.1%, which is slightly down from 62.3% in June. The labor force participation rate is the percentage of the population age 16 and older who are either employed or actively looking for work.
There are a few factors that could be contributing to the decline in the labor force participation rate. One factor is the aging population. As the population ages, there are fewer people in the prime working ages of 25 to 54. Another factor is the rising cost of childcare. The high cost of childcare can make it difficult for parents to work, especially if they have young children.
Healthcare led job creation by industry, adding 63,000 jobs for the month. Other sectors contributing include social assistance (24,000), financial activities (19,000), and wholesale trade (18,000). The other services category contributed 20,000 to the total, which included 11,000 from personal and laundry services, Leisure and hospitality, which has been a leading sector for most of the recovery in the Covid pandemic era, added just 17,000 jobs, consistent with a slowing trend, according to the U.S. Bureau of Labor Statistics.
It is evident that the aggressive pace of interest rate hikes has affected the growth of the labor market, which was the goal. The Federal Reserve is still committed to tame inflation to its 2% nominal target. However, the labor market and the economy as a whole have shown surprising resilience alongside cooling inflation and high-interest rates.
GDP gains have averaged 2.2% annualized for the first half of 2023, and the Atlanta Fed’s GDP tracker of growth is pointing out a 3.9% gain for the third quarter. However, Fed officials including Chair Jerome Powell have warned that the full effect of the rate increases has not been felt yet. Economists worry that the Fed could over-tighten and send the economy into a recession.