Blitz Bureau
THE United States employment growth was weaker than expected in July while the nonfarm payrolls count for the prior two months was revised down by a massive 258,000 jobs, suggesting a sharp deterioration in labor market conditions that puts a September interest rate cut by the Federal Reserve back on the table.
The Labor Department’s closely watched employment report on August 1 also showed the unemployment rate rose to 4.2% last month as household employment declined. Labor market resilience has shored up the economy amid headwinds from President Donald Trump’s aggressive trade and immigration policies.
Import duties are starting to boost inflation, raising the risk that the economy could experience a period of tepid growth and high prices, known as stagflation, which would put the U.S. central bank in a difficult position. Domestic demand increased at its slowest pace in 2-1/2 years in the second quarter. “The president’s unorthodox economic agenda and policies may be starting to make a dent in the labor market,” said Christopher Rupkey, chief economist at FWDBONDS.
“The door to a Fed rate cut in September just got opened a crack wider. 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.”
Nonfarm payrolls increased by 73,000 jobs last month after rising by a downwardly revised 14,000 in June, the fewest in nearly five years, the Labor Department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast payrolls would increase by 110,000 jobs after rising by a previously reported 147,000 in June. Estimates ranged from no jobs added to an increase of 176,000 positions. Payrolls for May were slashed by 125,000 to a gain of only 19,000 jobs. The BLS described the revisions to May and June payrolls data as “larger than normal.”
Economists have raised concerns about data quality in the wake of the Trump administration’s mass firings of federal workers.
