Key takeaways
- The Bureau of Labor Statistics (BLS) reported that the U.S. economy added 114,000 jobs in July 2024, a sharp slowdown from June.
- The unemployment rate ticked up to 4.3% in July from 4.1% in June, the highest level since October 2021, signaling the labor market is continuing to cool. This should position the Fed to begin easing policy by September.
- Average hourly earnings rose by a softer 0.2% month-over-month (MoM) and 3.6% year-over-year (YoY), reflecting inflationary pressures are easing.
- The July jobs report underscores that the labor market is moderating, making a September interest rate cut from the Federal Reserve even more likely.
A softer labor market
The July 2024 jobs report shows signs that the labor market is cooling down but remains stable. The U.S. labor market added 114,000 jobs in July, much lower than expected and the 179,000 rise in June. Payroll gains were revised down in June by 27,000 to 179,000 and May by 2,000 to 216,000.1
July’s nonfarm payroll gains bring the three-month average employment gain to 170,000, slightly lower than previously reported.2 This highlights that restrictive Federal Reserve policy is cooling the pace of job growth.
U.S. nonfarm payroll employment
In thousands
This chart shows the monthly nonfarm payroll employment change in thousands from April 2023 to July 2024.
The chart has two lines representing the 3-month moving average and 2018-2019 average monthly change at the level of 178,000.
- In April 2023, the nonfarm payroll was 278,000, 3-month moving average was 237,000;
- In May 2023, the nonfarm payroll was 303,000, 3-month moving average was 273,667;
- In June 2023, the nonfarm payroll was 240,000, 3-month moving average was 273,667;
- In July 2023, the nonfarm payroll was 184,000, 3-month moving average was 242,333;
- In August 2023, the nonfarm payroll was 210,000, 3-month moving average was 211,333;
- In September 2023, the nonfarm payroll was 246,000, 3-month moving average was 213,333;
- In October 2023, the nonfarm payroll was 165,000, 3-month moving average was 207,000;
- In November 2023, the nonfarm payroll was 182,000, 3-month moving average was 197,667;
- In December 2023, the nonfarm payroll was 290,000, 3-month moving average was 212,333;
- In January 2024, the nonfarm payroll was 256,000, 3-month moving average was 233,667;
- In February 2024, the nonfarm payroll was 236,000, 3-month moving average was 264,667;
- In March 2024, the nonfarm payroll was 310,000, 3-month moving average was 267,333;
- In April 2024, the nonfarm payroll is 108,000, 3-month moving average was 218,000;
- In May 2024, the nonfarm payroll is 216,000, 3-month moving average is 211,333;
- In June 2024, the nonfarm payroll is 179,000, 3-month moving average is 167,667;
- In July 2024, the nonfarm payroll is 114,000, 3-month moving average is 169,667.
Source: Bloomberg Financial L.P. Data as of August 2, 2024.
Industry breakdown
Job growth was mostly broad-based in July, with health care (+55,000), construction (+25,000) and transportation and warehousing (+14,000) jobs accounting for a majority of the total job gains.3
Health care jobs were driven upward by strong gains in home health care services, nursing and residential care facilities. Specialty trade contractors continued to boost construction jobs, while job gains were seen in the couriers and messengers, and warehousing storage fueled transportation sectors. These gains offset a loss in transit and ground passenger transportation.4
Private sector employment increased by 97,000, the slowest pace of job growth since March 2023. Meanwhile, government jobs were little changed (+17,000) as they continue to slow from their 2023 and early 2024 highs. Job gains were little changed among the mining, manufacturing and leisure and hospitality industries. Employment declined largely by 20,000 in information jobs,5 partially offsetting the total job gains.
Breakdown of U.S. job creation
Thousands
This chart shows the monthly nonfarm payroll employment change in thousands from December 2023 to July 2024. The chart has one line representing the monthly total U.S. job gains.
- In December 2023, Mining, Logging & Construction gained 21,000, Manufacturing gained 12,000, Lower Paying Services gained 149,000, Higher Paying Services gained 32,000, Government gained 76,000 and total jobs gained 290,000;
- In January 2024, Mining, Logging & Construction gained 24,000, Manufacturing gained 6,000, Lower Paying Services gained 114,000, Higher Paying Services gained 52,000, Government gained 60,000 and total jobs gained 256,000;
- In February 2024, Mining, Logging & Construction gained 24,000, Manufacturing declined 9,000, Lower Paying Services gained 170,000, Higher Paying Services declined 4,000, Government gained 55,000 and total jobs gained 236,000;
- In March 2024, Mining, Logging & Construction gained 39,000, Manufacturing declined 6,000, Lower Paying Services gained 176,000, Higher Paying Services gained 23,000, Government gained 78,000 and total jobs gained 310,000;
- In April 2024, Mining, Logging & Construction declined 10,000, Manufacturing gained 7,000, Lower Paying Services gained 134,000, Higher Paying Services declined 23,000, Government unchanged from March 2024 and total jobs gained 108,000;
- In May 2024, Mining, Logging & Construction gained 9,000, Manufacturing gained 3,000, Lower Paying Services gained 128,000, Higher Paying Services gained 66,000, Government gained 10,000 and total jobs gained 216,000;
- In June 2024, the Mining, Logging & Construction gained 20,000, Manufacturing declined 9,000, Lower Paying Services gained 112,000, Higher Paying Services gained 13,000, Government gained 43,000 and total jobs gained 179,000;
- In July 2024, the Mining, Logging & Construction gained 24,000, Manufacturing gained 1,000, Lower Paying Services gained 97,000, Higher Paying Services declined 25,000, Government gained 17,000 and total jobs gained 114,000.
Source: Bloomberg Financial L.P. Data as of August 2, 2024.
Unemployment rate
The unemployment rate ticked up to 4.3% in July from 4.1% in June, the highest level since October 2021, signaling the labor market is continuing to cool. This should position the Fed to begin easing policy by September.6
The rise in unemployment was driven by a continued robust increase in the labor force, up 420,000, and an increase in the labor force participation rate for prime-age workers to 84%,7 the highest level since 2001. The rise in prime-age workers (i.e., 25 to 54 years old) suggests that the labor market is in better shape than the unemployment rate indicates, as during a recession prime-age workers typically become discouraged and leave the labor force.
While the number of unemployed individuals rose by a sharp 352,000 in July, 249,000 of those individuals were temporarily laid off. 8 Layoffs related to Hurricane Beryl may have partially contributed to these temporary layoffs; despite the hurricane’s heavy emotional toll, it likely did not have much impact on the broader labor market data in July.
Average hourly earnings and job openings
The preliminary reading for the July average hourly earnings data, an important measure for inflation, rose by a softer 0.2% month-over-month (MoM) and 3.6% year-over-year (YoY) in July, down from 3.8% YoY in June, reflecting inflationary pressures are easing. Other measures of wage growth also point to the further slowing of wage gains, suggesting wage growth is trending in the right direction for inflation to fall to the Fed’s 2% target.9
The number of job openings fell to 8.18 million in June from 8.23 million in May according to the BLS Job Openings and Labor Turnover Summary report released the week before last.10 The survey reported the pace of hiring and layoffs both slowed, while the quits rate fell, pointing to a gradual cooling trend in the labor market.
Rate implications
The July jobs report underscores that the labor market is moderating, making a September interest rate from the Fed even more likely.
At July’s Federal Open Market Committee (FOMC) meeting, the Fed unanimously voted to hold policy rates steady for the eighth consecutive time, leaving the federal funds target rate unchanged at 5.25% to 5.5%.11 Fed Chairman Jerome Powell signaled the Fed is leaving the door open to start cutting rates in September, given welcomed progress on its dual mandate of maximum employment and stable prices.
Notably, Powell said the labor market is “normalizing” and “inflation has eased substantially” over the past year, positioning the labor market for a more accommodative stance if needed. The Consumer Price Index (CPI) rose by a weaker 3% in June and eased across the board, a decline from the 3.4% YoY rise in May.12
While Powell said “the time is approaching” for a rate cut and the July 2024 jobs report provides compelling evidence that growth is moderating, our strategists expect the Fed to carefully assess upcoming data prints before making this decision.13 The July inflation report, set to be released on August 14, and the Personal Consumption Expenditures (PCE) deflator (i.e., the Fed’s preferred measure of inflation), set to be released on August 30, will likely play large roles in the Fed’s decision-making moving forward.
References
Bureau of Labor Statistics (BLS), “The Employment Situation—July 2024.”
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
BLS, “June Job Openings and Labor Turnover Summary.” (July 2024)
Federal Reserve, “Federal Reserve issues FOMC statement.”
BLS, “Consumer Price Index – June 2024.”
Board of Governors of the Federal Reserve System, “Speech – Opening Remarks.”
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