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US economy lost 23,000 jobs in July
Newsflash: The US economy shed jobs last month.
The US nonfarm payroll shows a fall of 23,000 jobs in July, startling economists who had expected a rise of around 80,000.
Employment declined in local government education and retail trade, the US Bureau of Labor Statistics reports, but continued to rise in health care (a steady provider of jobs for Americans).
However, the US unemployment rate dipped to 4.1% in July, down from 4.2% reported last month, suggesting people dropped out of the labor force.
Key events
New York stock market opens higher after poor jobs report
Today’s surprisingly weak US jobs report has cheered investors on Wall Street.
That’s not because they get a kick out of other people losing their jobs, but because a weak labor market means it will be harder for the Federal Reserve to raise interest rates.
The S&P 500 share index rose by 25.2 points, or 0.33%, at the open to 7735.18 points.
The tech-focused Nasdaq saw a larger bounce – it’s up 0.7%.
The US private sector did add jobs in July, points out consultancy Capital Economics:
The underlying picture in the private sector was somewhat better, but still far from strong. Private payrolls grew by 30,000, led by pockets of strength in construction (+22,000) and healthcare and social assistance (22,600), although employment growth in the latter continued to slow relative to its average.
These gains were partially offset by sizeable declines in retail trade (-19,400), nondurable goods manufacturing (-13,000) and financial activities (-14,000).
The start of school holidays is probably responsibly for the 50,000 drop in employment in local government education last month.
And bars and restaurants may have cut back on jobs as the FIFA World Cup reached its conclusion.
Carson Group’s chief macro strategist Sonu Varghese explains:
“Headline payrolls were really disappointing, with 23,000 jobs lost in July. But the weakness was concentrated in local government, largely due to school-calendar seasonal effects, and leisure and hospitality as the World Cup boost rolled off.
The bigger picture is that unemployment fell to 4.1%, its lowest in a year. Combined with low initial jobless claims, that suggests the labor market remains in solid shape despite the volatility in payrolls.”
Is AI a factor behind drop in jobs?
Could AI be to blame for the drop in US employment last month?
Kyle Rodda, senior financial market analyst at Capital.com, suggests the rise of AI bots could be a factor, saying:
The interesting dynamic is the drop in the jobless rate. Another function of falling participation and the fact that data comes from a different survey.
At a higher level, there could be the fingerprints of AI in this jobs report too: employers possibly replacing workers with bots. We will have to dig into the details and wait for future data to get a clearer picture of that though.
Nic Puckrin, a former Goldman Sachs analyst, says:
On top of this, consumer confidence has crumbled and AI is swallowing thousands of white-collar jobs. So, when you look under the hood, the US economy is looking far more anaemic than the numbers suggest.
Ordinary Americans are in a tough spot, while the Federal Reserve must decide whether to sacrifice employment to control inflation or vice versa.”
According to outplacement firm Challenger, Grey & Christmas, AI has been the top reason given for layoffs in the last five months.
The US labor force participation rate, which measures how many people are either in work or looking for a jobs, has dropped.
The labor force participation rate slipped to 61.4%, which explains how the unemployment rate could fall even though the number of jobs also declined.
Dollar dented by bad jobs report
The dollar is falling too.
The dollar index, which tracks the greenback against a basket of other currencies, is down 0.4% today.
That’s lifted the pound up by half a cent to $1.35.
Odds of September rate rise are falling
Such a bad jobs report is sending ripples through the financial markets.
Traders are rushing to slash bets on a rise in US interest rates next month, concluding that the Federal Reserve won’t want to tighten policy when the economy is shedding jobs.
The rate futures market has now priced in just a 43.9% chance of Fed tightening in September, compared with 57% before the jobs report, Reuters flags.
The latest Household Survey Data, just released, also shows what’s going on in the US labor market.
Here’s a flavour:
Among the major worker groups, the unemployment rates for teenagers (12.1 percent) and people who are Hispanic (4.6 percent) declined in July. The jobless rates for adult men (3.9 percent), adult women (3.7 percent), and people who are White (3.6 percent), Black (6.3 percent), or Asian (4.0 percent) showed little or no change over the month.
Among the unemployed, the number of people on temporary layoff increased by 153,000 to 921,000 in July. The number of permanent job losers changed little at 1.7 million.
In July, the number of people jobless less than 5 weeks edged down to 2.0 million and is down by 344,000 over the year. The number of long-term unemployed (those jobless for 27 weeks or more) edged down over the month to 1.8 million but changed little over the year. The long-term unemployed accounted for 25.5 percent of all unemployed people in July.
Where jobs were lost, or created, last month
Here’s the details of where jobs were lost across the US economy last month.
Employment in local government education declined by 50,000 in July.
Retail trade lost 19,000 jobs in July, including a 21,000 drop at warehouse clubs, supercenters, and other general merchandise retailers and a 5,000 drop in employment at gasoline stations and fuel dealers.
Employment in financial activities fell by 14,000.
But….employment in health care continued its upward trend, rising by 22,000
Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; construction; manufacturing; wholesale trade; transportation and warehousing; information; professional and business services; social assistance; leisure and hospitality; and other services.
Fewer jobs created in May and June than first thought
Not only did the US economy lose jobs in July, it created fewer jobs than first thought in May and June.
The change in total nonfarm payroll employment for May has been revised down by 66,000, from +129,000 to +63,000, and the change for June was revised down by 37,000, from +57,000 to +20,000.
