U.S. Employers Cut 23,000 Jobs as Lower Unemployment Rate Masks Labor Weakness
U.S. employers cut 23,000 jobs in July, giving the labor market one of its clearest warning signs of the year even as the unemployment rate dipped to 4.1 percent, according to the Bureau of Labor Statistics.
The headline unemployment number looks better than the payroll figure, but the details are weaker. AP reported that 264,000 people left the labor force, meaning they were no longer counted as actively looking for work. BLS said the labor-force participation rate was 61.4 percent in July.
The job losses were concentrated in public education and retail. Local government education employment fell by 50,000, while retail trade lost 19,000 jobs. Financial activities continued to trend lower, losing 14,000 jobs. Health care added 22,000 jobs, but that was slower than its average monthly gain over the prior year.
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BLS also revised May and June payrolls lower by a combined 103,000 jobs, making the labor-market slowdown look broader than one weak month.
The report carries immediate policy consequences. A weaker labor market gives the Federal Reserve more reason to pause before raising interest rates, but inflation pressure remains a competing concern. Reuters reported that markets lowered the odds of a September rate hike after the jobs release.
Reaction split quickly. Stocks rose and Treasury yields fell as investors focused on the possibility of easier Fed policy, AP reported. The White House pointed to gains in construction and manufacturing, while economists warned that the participation drop made the lower unemployment rate less reassuring.
The next major test comes with upcoming inflation data and the August jobs report scheduled for Sept. 4.
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