US employment took an unexpected nosedive in July, with new Labor Department data today showing the economy lost 23,000 jobs instead of picking up 83,000 jobs, as economists had predicted.
Government job losses drove the negative trend, but private-sector hiring was weak, adding 30,000 jobs, mostly in healthcare and education.
Data beyond the topline was also bleak: Wage growth slid to 3.2% —the lowest in five years, and below current inflation of 3.5%. That gap between wage growth and rising prices is likely to make consumers feel more squeezed.
Unemployment fell, but for the wrong reason — job seekers are leaving the workforce. The labor participation rate fell to its lowest since February 2021.
The dynamic of high inflation and a weak labor market is a predicament for the Federal Reserve, which can’t tackle both at the same time. After its last meeting, board members seemed inclined to raise interest rates before the end of the year to tamp down on inflation.
But the central bank’s new chair, Kevin Warsh, prefers less public communication than his predecessor, making predictions about his next move more difficult.