In July, the U.S. labor market suffered a blow. Nonfarm payrolls added only 73k jobs, short of the 104k expected. As a result, this nascent labor market recovery has many worried about the long-term viability of the rebound. Analysts were quick to emphasize that total employment growth has almost completely ground to a halt. They found little return on investment in non-health care and social assistance industries.
A real kick-in-the-teeth surprise about job growth for July, too. Further, adjustments to the employment numbers from previous months showed even larger changes. The three-month average of payroll growth, which was 150,000 coming into this report, has fallen off a cliff. When factoring in revisions, the rate of job growth has stumbled down to a mere 35,000.
Revisions Signal Deeper Issues
The revisions out of May and June were especially dire, initially subtracting a combined 258,000 jobs from tallies – yes, that’s a loss, not a gain – over those two months. That’s an enormous revision down, the biggest downward net revision since May of 2020. Taken together, the revisions paint a picture of broad-based weakness in hiring across industries, pointing to possible cracks in the recovery’s facade.
“Real-time” market conditions which are subject to quick changes can often create a difficult picture of what’s really happening with job growth. The recent changes have led many economists and policymakers to question the degree to which the labor market is recovering, along with its robustness.
Those corrected numbers show a massive expected change. June’s private sector gain was revised down from the originally reported 74,000 jobs to a mere 3,000 increase. Moreover, June’s now-noted 73,000 boost to government payrolls was revised down to a tepid 11,000. These changes have some economists rethinking their pessimistic view of the economy.
Government Hiring Freeze Impacts Employment
The new, ongoing federal government hiring freeze has compounded the situation. In July, this pattern resulted in a negative 10,000 jobs loss — dragging total government payrolls down into the negative. This is a very big drop, with total government employment having lost 84,000 since the start of the year.
The impact of the hiring freeze is more and more apparent as government jobs continue to disappear. The drop in government employment highlights bigger problems with the federal workforce.
In a nice sign outside of public sector hiring, July private sector hiring snapped back with 83,000 new jobs added. This gain hardly makes up for the loss in other fields. This gap between public and private sector hiring is symptomatic of the lopsided recovery under way across much of the labor market.
Labor Market Outlook Remains Uncertain
Despite hopes for a stronger recovery, analysts are questioning the previously held view of a “solid” labor market following the latest employment report. The Federal Open Market Committee (FOMC) called the labor market robust earlier this week. This newest data calls that judgment into question.
As one economist noted, the FOMC’s characterization of the labor market as ‘solid’ is looking pretty odd now. This shift in tone follows the release of July’s employment report.
Gold prices have rocketed up to over $3,330 post U.S. NFP report. A troubling mix of underlying economic indicators points to a boom or bust future labor market.