2024-08-02 13:19:09
(Washington) With three months to go before the US presidential election, the U.S. job market deteriorated more than expected in July, with the unemployment rate hitting the highest level since October 2021. The Federal Reserve, which had previously focused on inflation, is now worried.
The unemployment rate rose to 4.3% in July, compared with 4.1% in June, according to data released by the Labor Department on Friday. Only 114,000 jobs were created in July, compared with 179,000 jobs created the previous month.
Analysts expect the unemployment rate to remain at 4.1% in July and 185,000 jobs to be created, according to the MarketWatch consensus.
President Joe Biden responded in a press release: “Job gains have been slower amid much lower inflation.”
The health of the job market could influence voter perceptions, and Democratic Vice President Kamala Harris, who is currently running for the White House since Joe Biden dropped out, and Republican candidate and former President Donald Trump are neck and neck in several states.
Photo credit: NATHAN HOWARD, Reuters archive
Joe Biden, President of the United States
For the Trump camp, the jobs data is “further proof” that Joe Biden and Kamala Harris’ economic policies are “failing the American people,” Carolyn Levitt, a spokeswoman for the Republican candidate, said in a statement.
A deteriorating labor market also weighed on Wall Street on Friday, with all three major indexes closing down at least 2.2% in early trading.
‘Rapid deterioration’
“The private sector, excluding health care and social assistance, has deteriorated rapidly and is now languishing. […] American households are feeling the effects,” Julia Pollak, chief economist at job ad site ZipRecruiter, commented in a report.
The United States has experienced nearly three years of labor shortages, leading employers to raise wages to attract and retain workers, fueling a surge in inflation.
In July, hourly wages saw their slowest increase since May 2021 (up 3.6% year-over-year). However, this is still above inflation, which fell to 3% year-over-year in June, according to the Consumer Price Index for Pension Funds.
Before the COVID-19 crisis, annual salary increases were between 2% and 3%.
The deterioration in the job market in July should serve as a strong argument for a rebound in mid-September, when U.S. central bank officials meet and decide whether to cut the institution’s interest rates.
That’s the highest level since 2001, forcing banks to offer high interest rates on all kinds of loans to customers in an effort to ultimately reduce inflation. The Fed’s preferred inflation gauge, the PCE index, which it hopes to get down to 2%, fell to 2.5% in June.
But these actions will also have an impact on employment.
” mistake”
” even though [le taux de chômage] “The economy remains at historically low levels, and further deterioration would be a cause for concern for the Fed,” stressed Carl Weinberg and Rubeela Farooqi, economists at HighFrequency Economics.
On Wednesday, Fed officials said they were now as concerned about a possible rise in unemployment as they were about inflation. Ensuring full employment and promoting price stability are effectively their twin missions.
But they chose not to cut rates on Wednesday.
Democratic Senator Elizabeth Warren said on social media: “This is a serious mistake.”
“He has been warned repeatedly that waiting too long could cause the economy to plummet. The jobs data is sounding the alarm,” she warned.
Market participants also expect the Fed to cut interest rates further in September, by half a percentage point compared with the typical quarter percentage point, according to CME Group’s assessment.
Jerome Powell estimated on Wednesday that “labor market conditions” have “returned roughly to pre-pandemic levels: stable, but not excessive.”
Analysts say jobless claims hit their highest level in a year at the end of July, but are still very low, comparable to levels in the 1960s.
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