WASHINGTON—A new jobs report revealing “mediocre” growth not only signals a rate cut is likely in September, it could be larger than expected, according to one credit union economist.
According to new data from the Bureau of Labor Statistics, the labor market added 114,000 nonfarm payroll jobs in July, fewer additions than the 175,000 that had been predicted by many economists.
Meanwhile, the unemployment rose 4.3%, up from 4.1% June, marking its highest level since October 2021. In July, the economy added 179,000 jobs.
"The July jobs report was a mediocre one, with job gains of just 114,000 and a rise in the unemployment rate to 4.3%,” America's Credit Unions’ Deputy Chief Economist Curt Long said in a statement. “The unemployment rate has now risen for four consecutive months, and has now triggered the Sahm Rule, a labor-market based indicator used to provide an early recession signal. With many observers fearing that the Fed has fallen behind the curve in addressing deteriorating labor market conditions, a September rate cut is a near certainty and a 50-basis point cut is now on the table."
Wage Growth Slows
The new data show wage growth slowed to 3.6% year-over-year, down from 3.9% in June. On a monthly basis, wages increased 0.2%, lower than the 0.3% gain seen in June. In addition, the labor force participation rate rose slightly to 62.7% from 62.6% in June.
The new data follow by a few days a report from the Bureau of Labor Statistics that show a decrease in job openings as of the end of June, while hirings fell and quits hit their lowest level since November 2020.
Fed Chair’s View
Earlier this week, following the conclusion of its July meetings, Federal Reserve Chairman Jay Powell was asked whether he was worried about the Sahm Rule being triggered.
"The question really is one of are we worried about a sharper downturn in the labor market. The answer is we are watching carefully for that,” he said.