US labor market close to stall speed

The data ...

In July, job growth in the US came to 73,000. This is below expectations (consensus 104,000, Commerzbank 100,000). Revisions reduced the data for prior months by a total of 258,000, which is an unusually large revision. As expected, the unemployment rate rose from 4.1% to 4.2% (4.248% rounded to three digits). Average hourly earnings rose by 0.3% from the previous month. In year-on-year terms, wages rose by 3.9% after 3.8% in June (revised from 3.7%).

... and the background

Even more important than the relatively weak employment growth of 73,000 in July is the fact that the overall picture has also deteriorated significantly. According to revised data, only 14,000 new jobs were created in June and only 19,000 in May. Previously, 147,000 and 144,000, respectively, had been reported. The trend, measured on a six-month average, is thus clearly downward. We had already pointed out signs of weakness beneath the surface in our previous comments, such as the fact that only a few industries have been adding jobs for some time now, and these are mainly non-cyclical sectors such as government and healthcare. One of the few positive aspects is that employees worked longer hours on average. In this respect, we should wait for the next report to see whether the weakness in job creation is confirmed.

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