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Economic News

United States: Employment Surprises to the Downside, and the Unemployment Rate Rises Again

August 2, 2024
Marc-Antoine Dumont
Senior Economist

Highlights

  • According to the establishment survey, total nonfarm payroll employment went up 114,000 in July.
  • Average hourly wage growth slowed slightly, with a 0.2% gain in July after June’s 0.3% increase. Year-on-year wage growth came in at 3.6%.
  • The household survey showed similar growth in employment, with 67,000 jobs created, and the jobless rate rose another 0.2%, ending the month at 4.3%.

Comments

Job creation according to the establishment survey came in below the consensus forecast of 180,000. However, the surprise is less dramatic than it was in May, when the difference between the forecast and preliminary results was closer to 100,000.

 

Drilling down into July’s results, we can see that the slowdown in growth was fairly broad-based. Of the 250 industries covered by the survey, the proportion where employment increased fell from 56.0% in June to 49.6% in July. Once again, we saw a decline in temporary help services (-20,000), where the number of workers has decreased in 27 out of the past 28 months. In the past, this drop might have been viewed as a warning sign for labour market problems in general, but the sector’s decline has been so sharp—and so isolated—that we believe the problem is specific to this industry.

 

The unemployment rate rose for the fifth month in a row, boosted by a rapid increase in the labour force and the number of unemployed individuals, and at 4.3%, July’s print is the highest since October 2021. That said, the household survey is less reliable and more volatile, and its margin of error is much higher than the establishment survey’s.

Implications

This rapid slowdown in employment growth in the United States comes just two days after the Federal Reserve (Fed) held its key rate at 5.5%. With wage growth also slowing—albeit not as quickly—the US job market’s recent resilience seems to be fading. As such, we expect the Fed to start cutting rates in September.

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