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 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. It cut 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 Wall Street's consensus forecast for a 0.3% gain. On an annual basis, wages were up 4.4%, again ahead of Wall Street's 4.2% forecast.
“This month’s slow job growth is a sign the economy is continuing to cool; while a negative in some senses, this is a positive indicator for the Fed and may soon end its interest rate hikes," said Steve Rick, chief economist at TruStage (formerly CUNA Mutual Group).
"Despite this month’s jobs report, continued efforts by the Fed to tame inflation will likely have a lagging effect and further impact the jobs market, especially the manufacturing and housing sectors," he added. "Moving forward, we anticipate the unemployment rate will remain low."
U.S. stocks were higher following the data release, with futures contracts tied to the Dow Jones Industrial Average indicating a 47 point opening bell gain and those linked to the S&P 500 suggesting a 12 point advance. Futures tied to the tech-focused Nasdaq were up 72 points.
Benchmark 10-year Treasury note yields fell 4 basis points from overnight levels -- the highest since November of 2022 -- to 4.159% while 2-year notes edged lower to to 4.877%.
“While the labor market is slowly cooling as rate rises have some impact, at the moment there still seems to be enough momentum in the economy to avoid recession," said David Henry, investment manager at Quilter Cheviot. "Whisper it, but the fabled ‘soft landing’ may just be achieved, although a lot can still happen before the Fed declares 'job done'."
The CME Group's FedWatch now indicates an 18.5% chance of a 25-basis-point (0.25 percentage point) hike next month month, down from 19.5% at the close of trading last night. Bets on another rate hike in November hovered at around 30%.
Earlier this week, payroll-processing group ADP said in its National Employment Report that private-sector jobs grew 324,000 last month, while Challenger Gray & Christmas's monthly report of layoffs said job cuts slowed to the lowest levels in 11 months.
In a separate report Thursday, the Labor Department said weekly jobless claims rose modestly to 227,000 for the period ended July 29, matching Wall Street estimates.
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