U.S. Hiring Significantly Slowed

Employers added 114,000 jobs in July, and the unemployment rate rose to 4.3 percent, the highest level since October 2021.

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Monthly change in jobs

Note: Data is seasonally adjusted.

Source: Bureau of Labor Statistics

Ms. Sahm herself reiterated this morning that the statistical chaos caused by the pandemic may mean that this could be the first cycle where her rule doesn’t apply. But she, and others, are now worried that unemployment could snowball further.

With the Sahm Rule recession indicator now triggered by the rise in unemployment, Ms. Sahm offered some context a moment ago, mentioning that “large shifts from labor shortages caused by the pandemic to a big increase in immigration have temporarily swung the unemployment rate around some. So, the current increase is not as a bad as it looks but it’s not good.”

Julia Pollak, chief economist at ZipRecuiter, took the report as likely bad news after a year of normalizing data. “The labor market is clearly no longer normalizing,” she wrote in a note. “Further deterioration could set off a negative cycle of job losses, consumer spending declines, business revenue declines and more job cuts.”

President Biden acknowledged the step-down in job growth in a statement, but put it in the context of an economy returning to something more like normal. “Today’s report shows employment is growing more gradually at a time when inflation has declined significantly,” he said.

Men in their prime working years, between ages 25 and 54, saw a big jump in labor force participation, to 90 percent from 89.6 percent. That’s the highest share since 2009.

Seema Shah, chief global strategist at Principal Asset Management, expressed her concern succinctly in a note: “Oh dear, has the Fed made a policy mistake?”

The rise in unemployment — which, again, looks like it could be people starting to look for work — was particularly pronounced among men, 4.4 percent of whom are unemployed, up from 4.1 percent last month.

“You have to be careful in interpreting this data; it seems clear to me that there is noise in this report,” Omair Sharif, founder of Inflation Insights, tells me. He thinks that the Fed is going to wait and watch the August jobs report, which comes out before its mid-September meeting, before reaching any big conclusions.

Another reaction from Capital Economics’ Stephen Brown: “In short, all this makes a September interest rate seem certain,” with even a super-sized half-point cut in the offing.

July’s softer numbers comport with other data, like job openings and the employment cost index, which have slowed dramatically in recent months.

Futures are now down more sharply: the S&P 500 fell to 1.6 percent, and the Nasdaq 100 to 2.3 percent. This jobs report “will fuel debate about whether more significant policy easing is needed” from the Fed, said Torsten Slok, chief economist at Apollo Global Management.

Manufacturing employment has been flat as a pancake over the last year, as employers have struggled to expand in the face of high interest rates. The manufacturing purchasing managers index, a survey of corporate officials, dipped further into negative territory last month.

The weakening in the labor market is even more pronounced when taking into account the number of people working part time who would rather be working full time, which rose by 346,000. That drove a broader measure of labor market slack to 7.8 percent, from 7.4 percent.

These jobs numbers, combined with some economic data this week suggesting that the economy is cooling, are likely to heighten jitters that the Fed may have waited too long to start lowering interest rates.

One positive note on the unemployment rate: The rise to 4.3 percent from 4.1 percent was mostly driven by growth in the number of people looking for work, which rose by 420,000. That pushed the labor force participation rate up slightly, to 62.7 percent.

This is not good news for the Fed. Officials held off on a rate cut this week, but this jump in unemployment is going to stoke worries that they are behind the curve: By cutting rates too late, they might cause serious damage to the labor market.

The Fed waited this week to cut interest rates because officials want to see a little bit more evidence that inflation is cooling. People were already wondering if they had waited too long. This report is really going to amplify that worry.

Odds of a super-sized Fed rate cut in September — half a point rather than a quarter-point — jumped sharply following Friday’s data release.

The information sector lost 20,000 jobs, and other industries were largely flat — including leisure and hospitality, which only in recent months regained its prepandemic level.

Business services jobs saw a slight decline

Change in jobs in July 2024, by sector

Education and health

Leisure and hospitality

Note: Data is seasonally adjusted.

Source: Bureau of Labor Statistics

The immediate reaction in the stock market was muted, with both S&P 500 and Nasdaq 100 futures still down by more than 1 percent, as they were this morning before the release.

Of course, 114,000 jobs is still a respectable number for normal times, enough to absorb people entering the labor market. But it’s a significant drop from the average of 215,000 jobs over the previous 12 months.

Child care needs challenge women’s work force gains.

Jessica Cuevas works part time for an education nonprofit. She would like a full-time job, but she worries about the cost of child care. Credit. Michelle Litvin for The New York Times

Women’s participation in the labor force has surged since the pandemic lockdowns, and new data on Friday underscored that trend.

Among women in their prime working years — 25 to 54 years old — 78.1 percent were in the labor force in July, tying a record set in May.

But there are signs that the labor force participation gains among women with children under 5 have plateaued since September, according to an analysis from the Hamilton Project, an economic policy research group at the Brookings Institution.

While economists are not exactly sure what has caused the downshift, one frequently cited factor that could be preventing more mothers from working is the continued lack of available and affordable child care options.

Jessica Cuevas, who is 35 and lives in Chicago, works part time from home for an education nonprofit, though the work is sporadic and the pay is inconsistent. She wants a full-time job — in part so she and her husband can buy a bigger house — but she is concerned that the expense of child care would wipe out any financial upside.

“I feel like right now, considering the economy, considering just the cost of living, we feel stuck,” she said.