The U.S. Bureau of Labor Statistics released its unemployment report for the month of July on Friday—offering good news for a nervous economy.
- Unemployment was around 3.5% for July, roughly on par with June’s 3.6% rate, but down from 9.1% in June 2022.
- 187,000 jobs were added to the economy last month, up from 185,000 in June but down from 400,000 in July 2022.
- This came in below the Dow Jones’ expectation of 200,000
- Average hourly earnings grew 4.4% in the past year, slower than last year but still improving from the pandemic years.
- Labor force participation rates held at 62.6% for the fifth month.
Why It’s Important
Friday’s news is good news for the Federal Reserve, which struck a very cautious and bleak tone last week when it hiked interest rates to their highest range since 2001. Fed Chair Jerome Powell addressed the nation after the announcement, suggesting that the central bank’s internal concerns about lowing inflation to 2% were not being aggressively combated enough, implying more hikes are necessary.
Following multiple historic bank collapses in the spring, the Fed has acted more cautiously with its hikes. It raised rates by 5.25% in the past 16 months but slowed the pace of hikes after the market showed signs of stress. The Fed is aware that the U.S. is on the cusp of either facing a recession or a soft landing, and it is nervous about making the wrong decision—accentuating either inflation or unemployment.
Analysts are generally more optimistic about the state of the economy going into the final half of the year. Most economists agree that a soft landing is likely and that continuing improvements to the Consumer Price Index and the unemployment rate are signs that the current economy is resilient enough to handle higher interest rates.
“Overall, this is still not the picture of the labor market we would expect to see if the economy were in danger of decelerating dramatically in the short term, although without question, there are signs of moderation,” says BlackRock CIO Rick Rieder.