Jobs Report Shock: 187,000 New Hires In July, Weakest Since 2020, But Wages Rising

The U.S. economy added fewer than expected new jobs last month, with downward revisions for gains estimated in May and June, suggesting hiring in the world’s biggest economy is cooling sharply into the autumn months. 

The Labor Department’s Bureau of Labor Statistics said 187,000 new jobs were created last month, firmly shy of the Wall Street consensus forecast of a 200,000 gain and the weakest monthly increase since December of 2020.

Private payroll gains were pegged at 172,000, the BLS said, although the unemployment rate eased to 3.5%, just ahead of the 1969 low of 3.4% recorded earlier this year.

The BLS also revised its June jobs-addition estimate lower, to 185,000 from its original estimate of a 209,000 net gain, while cutting its May estimate to 218,000 from its prior estimate of 306,000.

The BLS noted that hourly wages were up 0.4% on the month — compared with the 0.4% gain recorded in June and topping the Street’s consensus forecast for a 0.3% gain. On an annual basis, wages were up 4.4%, again ahead of the Street’s 4.2% forecast.

U.S. stocks were lower following the data release, with futures contracts tied to the Dow Jones Industrial Average indicating a 62 point opening bell decline and those linked to the S&P 500 suggesting an 8 point advance.

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Benchmark 10-year Treasury note yields rose 2 basis points from overnight levels — the highest since November of 2022 — to 4.202% while 2-year notes edged higher to 4.923%.

CME Group’s FedWatch now indicates a 17.5% chance of a 25-basis-point (0.25 percentage point) hike next month month, up from 19.5% at the close of trading last night, with bets on another rate hike in November hovering at around 30%.

Earlier this week, payroll-processing group ADP said in its National Employment Report that private sector jobs grew by 324,000 last month, while Challenger Gray & Christmas’ monthly report of layoffs said job cuts slowed to the lowest levels in eleven months.

In a separate report Thursday, the Labor Department said weekly jobless claims rose modestly to 227,000 for the period ending on July 29, matching Street estimates.

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