Raising new concerns about the job market in the US, fresh data revealed that fewer jobs were created than expected in July. This revives the expectations of interest rate cuts by the Federal Reserve in the month of September.
Reports noted that just 73,000 jobs were formed last month, much below the expectations that 110,000 would be created. Also, growth in job numbers was cut down by a combined 258,000, which gives a dull picture of recent labor market activity.
Federal Reserve Maintains Interest Rate at 4.25-4.50%
The unemployment rate rose to 4.2% in July, the highest since late 2021, as household employment declined and labor force participation continued to shrink, though at a slower pace. The disappointing data comes just two days after the Fed left interest rates unchanged at 4.25%-4.50%. Fed Chair Jerome Powell had suggested a cautious approach to further policy easing, dampening hopes for a near-term rate cut. However, Friday’s labor report may shift the Fed’s stance.
“The door to a Fed rate cut in September just got opened a crack wider,” said Christopher Rupkey, chief economist at FWDBONDS. “The labor market is not rolling over, but it is badly wounded and may yet bring about a reversal in the U.S. economy’s fortunes.”
Additional Job Losses to Hit US Market
Job growth remains uneven across sectors. Healthcare added 55,000 positions, continuing its strong performance, while social assistance jobs rose by 18,000. However, federal government employment fell by another 12,000 jobs, bringing total losses in that sector to 84,000 since January. Additional cuts are likely after the Supreme Court cleared the way for mass federal layoffs as part of President Donald Trump’s broader plan to reduce government spending. Despite this, the administration has indicated that some agencies may not proceed with layoffs.
Moreover, Trump on Thursday imposed steep tariffs, including a 35% duty on various Canadian imports, just ahead of a key trade deal deadline. These tariffs affect dozens of U.S. trading partners and fuel inflationary pressures and compounding challenges for businesses already facing slowing demand.
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