The US Economy Lost 23,000 Jobs in July and the Unemployment Rate Did Not Move

Nonfarm payrolls fell by 23,000 in July. Economists had been looking for somewhere between 83,000 and 95,000 new jobs. The unemployment rate held at 4.1 percent with 6.9 million people out of work, which is the part that makes this hard to read. A shrinking payroll and a flat jobless rate usually means people are leaving the labour force rather than losing jobs.

The revisions did more damage than the headline. May came down 66,000, from 129,000 to 63,000. June came down 37,000, from 57,000 to 20,000. Put those together with July and the average monthly gain over the past twelve months is 34,000, which for an economy this size is close to a standstill. Three months of hiring turned out to be roughly one month of hiring.

The composition is narrow and government-heavy. Local government education shed 50,000 positions. Retail trade lost 19,000 and financial activities 14,000. Health care added 22,000 and carried on being the only reliably expanding sector, as it has been for most of two years. Everything else the Bureau described as showing little change over the month, which is a phrase doing a lot of work in a report like this one.

Wages are the reason nobody is calling this a recession signal yet. Average hourly earnings rose two cents to 37.62 dollars, up 3.2 percent over the year. That is above the headline inflation rate but not by much, and it is decelerating rather than collapsing. A labour market that is not hiring but is still paying is a labour market that is hoarding, not firing.

For the Fed this lands awkwardly next to everything else. The committee held at 3.50 to 3.75 percent on the 29th of July with three officials dissenting in favour of a hike. Second quarter growth came in at 1.5 percent annualised while the GDP price index printed 6.3. Now payrolls are negative. That is the shape of an economy slowing without the inflation coming down with it.

Markets did not treat it as a dovish print for long. The S&P 500 closed at a record on Friday and posted its strongest week since April, and the ten-year yield sat at 4.71 percent on Monday, which is not the reaction of a bond market that thinks the tightening cycle just ended. Two negative payroll months in a row would change the argument entirely. One, with revisions this large, mostly tells you the earlier numbers were wrong.