Non-Farm Payrolls: Lower-Than-Expected Job Growth, Rising Earnings

Highlights

• Job additions fall short of expectations.
• Average hourly earnings witness notable increase.
• Employment gains for May and June downgraded.

Overview

The U.S. economy added a lower-than-expected 187,000 jobs in July, trailing the Dow Jones consensus estimate of 200,000, while the unemployment rate remained relatively stable at 3.5%. However, the increase in Average Hourly Earnings offered a glimmer of positive news for the labor market.

Healthcare, Finance Drive US Job Growth

Job creation was primarily driven by health care, social assistance, financial activities, and wholesale trade sectors, contributing to the overall employment growth. The unemployment rate and the total number of unemployed persons, which stands at 5.8 million, showed little change from the previous months, remaining within the 3.4% to 3.7% range since March 2022.

Rising Average Earnings Signal Promising Trend

A closer look at earnings reveals a promising trend. Average hourly earnings for all employees on private nonfarm payrolls rose by 14 cents, or 0.4%, to $33.74 in July, a year-over-year increase of 4.4%. Average earnings of private-sector production and nonsupervisory employees also rose, albeit by 13 cents, or 0.5%, to $28.96.

Workweek Shortens, Manufacturing Hours Unchanged

The report also highlighted a slight decrease in the average workweek for all private nonfarm payroll employees. It dropped by 0.1 hour to 34.3 hours, while the manufacturing sector’s average workweek and overtime remained unchanged.

Revised Figures Show Weaker Job Momentum

However, it’s worth noting the downward revision in nonfarm payroll employment numbers for May and June, which were adjusted by 25,000 and 24,000, respectively. This effectively lowers the employment gains for these two months by 49,000, indicating weaker labor market momentum than previously reported.

US Labor Market Shows Resilient Optimism

In conclusion, despite a miss on job additions, stable unemployment and the rise in hourly earnings paint an optimistic picture of the U.S. labor market. The realignment of previous employment gains signals a more cautious outlook, keeping market participants on their toes in anticipation of next month’s figures.