The United States job market is undergoing a gradual slowdown, with companies not hiring as robustly as in previous years, but also not engaging in widespread layoffs. Despite this, American workers are experiencing a higher level of job security. The Federal Reserve views this development positively as it alleviates the pressure on companies to increase wages while avoiding significant job losses. According to the upcoming July employment report from the Labor Department, it is expected that 175,000 jobs were added last month. This figure is a decrease from the 206,000 jobs added in June, with the unemployment rate projected to remain at 4.1%.
Federal Reserve Chair Jerome Powell mentioned that the economy is currently in a favorable position. Job creation in the first half of the year averaged 222,000 new jobs per month, a decline from the previous year’s average of 251,000. The economy is a key factor for voters as they gear up for the upcoming presidential election, with concerns focused on high prices rather than the strong job gains of recent years. Inflation reached a four-decade high two years ago and although it has slightly decreased, consumers are still paying 19% more for goods and services overall compared to before the inflation surge in 2021.
Despite a slight uptick in the unemployment rate for the past three months, economists do not view this as a cause for immediate concern. The Sahm Rule, which historically signals an economy in recession if the unemployment rate rises by half a percentage point from its low of the past year, has not indicated an imminent recession. The recent rise in unemployment rates is attributed to an influx of new workers into the labor force who may take time to secure employment, rather than significant job losses.
Layoffs have decreased to the lowest level in over a year and a half, indicating that companies are not letting go of workers in large numbers. Unexpected mass immigration, including illegal immigration, has impacted job numbers, with some newcomers facing delays in finding employment. The job market’s slowdown is causing concern among some economists, who fear a potential negative cycle of rising unemployment leading to reduced spending and more layoffs.
The Federal Reserve, despite calls for preemptive action, chose to maintain its benchmark interest rate at the current highest level in 23 years. They had raised the rate 11 times over the past two years to combat rising inflation, which has since decreased but remains above the Fed’s 2% target. The Fed is expected to consider cutting rates at their next meeting in September based on further evidence of decreasing inflation rates. The July job report may provide some positive signs, with average hourly wages expected to show a modest increase of 3.7% compared to the previous year, moving closer to the 3.5% target aligned with the Fed’s inflation goal.
