US Job Growth Slows To A Crawl As Unemployment Rises

The U.S. added 114,000 nonfarm payroll jobs in July as the unemployment rate ticked up to 4.3%, according to Bureau of Labor Statistics (BLS) data released Friday.

Economists anticipated that the country would add 175,000 jobs in July compared to the 206,000 added in initial estimates for June, and that the unemployment rate would remain stable at 4.1%, according to U.S. News and World Report. Federal Reserve Chairman Jerome Powell noted in a press conference on Wednesday that a continued slowdown in the labor market could be a sign of further softening in the economy and contribute to a possible cut to the federal funds rate and an easing in harsh credit conditions that have weighed on Americans.

“The labor market is playing along with the Federal Reserve’s effort to slow inflation,” Nela Richardson, chief economist at human resources software company ADP, told U.S. News and World Report. “If inflation goes back up, it won’t be because of labor.”

Persistently high inflation has weighed on businesses’ ability to hire, measuring 3.0% year-over-year in June, well above the Fed’s target of 2%. In response to elevated inflation, the Fed chose to keep its target federal funds rate in a range of 5.25% and 5.50% at the conclusion of Wednesday’s Federal Market Open Committee (FOMC) meeting, marking the 8th meeting in a row where the Fed chose to leave the rate unchanged.

Inflation has raised prices by more than 20% since President Joe Biden first took office in January 2021. The combination of high inflation and the increased borrowing costs from elevated interest rates have weighed on American wallets, with the percentage of credit card balances more than 60 days overdue reaching 2.59% in the first quarter, the highest rate of delinquency since records began in 2012.

The job market could receive a boost if the FOMC follows the overwhelming majority of investors’ predictions that the federal funds rate will be cut by 0.25% at the next meeting in September, according to CME Group’s FedWatch Tool. A rate cut could also help boost real gross domestic product, which increased at an annual rate of 2.8% in the second quarter of 2024, up from 1.4% in the first quarter, due to greater spending from consumers and the government.