U.S. Adds 187,000 Jobs in July as Economy Cools

on Aug5
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The U.S. economy continued to generate sturdy employment growth in July, but it showed definite signs of cooling alongside the Federal Reserve’s battle to suppress inflation.

American employers added 187,000 jobs last month, the Labor Department reported on Friday, experiencing 31 straight months of growth. The unemployment rate sank back to 3.5 percent, near a record low.

Revised figures for the prior two months modulated the economic picture slightly from an almost imperceptible slowdown to a clear deceleration after gains exceeding 200,000 had become the norm. Still, the report shows that most people who want to work can find jobs, keeping upward pressure on wages.

Average hourly earnings rose 4.4 percent from a year earlier, slightly more than expected, and enough to give workers more spending power even as prices keep going up.

“We are converging towards a more sustainable pace,” said Lydia Boussour, a senior economist at the consulting firm EY-Parthenon, noting that wages and the rate of hiring don’t always move in tandem. “The labor market is rebalancing, but it’s a gradual process, and that explains why we’re still seeing some tightness.”

“You don’t want to lose people and have to go fill those positions when things get busy,” he said. “So we will look for R-and-D projects, new machine development, maintenance — anything we can do in a slowdown to keep our people busy and productive so we have the people we need in a pickup.”

Although the share of people over age 65 who are either working or looking for work is still lower than in February 2020, the participation rate for people in their prime working years — ages 25 to 54 — has risen 0.4 percentage points. At the same time, a renewed flow of immigrants has eased some of the most acute shortages.

Other factors may be clouding the employment picture this summer. The hottest July on record, for example, made it difficult to perform any work outside. At the very least, that could displace some employment until later in the year. The longer temperatures stay at extreme levels, the more damage they could do.

The coming months also feature new risks, including the resumption of student loan payments for tens of millions of borrowers in October, the debt overhang from vacant commercial office buildings and the rising tide of defaults on risky loans. Even if nothing collapses, companies may cut payrolls to maintain profit margins as consumers demand lower prices.

That’s why most forecasters still expect meager monthly increases in employment — or even declines — toward the end of 2023, which may finally bring inflation back to the 2 percent rate that the Fed is looking for. But for now, most workers remain optimistic that if they lost their jobs, they wouldn’t remain unemployed for long — and they can afford to be choosy about the next one.

Nathan Beaumont, an operations supervisor in transportation and logistics, was laid off a week ago when the trucking company Yellow said it was shutting down. He had been planning to quit anyway, because the unstable schedule deprived him of time with his fiancée and friends, but he was glad to get two weeks of severance and then unemployment benefits — and isn’t too worried about finding another position.

Right now, he would prefer something that would lend a bit more stability.

“Over the last few years, it seems like every year and a half to two years, I’ve had to look for a new job,” said Mr. Beaumont, who lives in a suburb of Minneapolis. “If I can find a place where I can stay for a good long time, I’ll take that job.”

Jeanna Smialek and Ben Casselman contributed reporting.

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