USA (Washington Insider Magazine) – The US labor market saw a major slowdown in July, with only 114,000 jobs added, falling short of the 180,000 anticipated by economists and markedly below the 179,000 added in June. This figure also contrasts sharply with the average monthly gain of 215,000 observed over the past year. The unemployment rate rose to 4.3%, the highest level since October 2021, up from 4.1% in June.
Following the release of these numbers, financial markets reacted sharply. The S&P 500 dropped 2.5%, marking its most significant decline since 2022, while the Nasdaq Composite fell by 2.9%. This downturn reflects growing concerns about the potential impact of the labor market slowdown on the broader economy.
Federal Reserve Faces Pressure Amid Economic Uncertainty
According to Thegurdian, the Federal Reserve is under scrutiny as it navigates these economic conditions. The central bank held interest rates steady this week but has signaled the possibility of rate cuts later this year. Federal Reserve Chair Jerome Powell indicated that while the Fed is approaching a point where rate reductions might be warranted, no immediate action is planned.
Market traders have adjusted their expectations, now forecasting a reduction of more than one percentage point in interest rates by the end of the year, up from previous predictions of just over 0.75 percentage points. This adjustment suggests at least one substantial rate cut could occur before the year’s end, although Powell has emphasized that a large reduction is not currently being considered.
Economic Impact and Political Reactions
While acknowledging the slowing rate of employment growth, President Joe Biden pointed out that business investment was still strong and blamed the delayed recovery. Even with the general slowdown, businesses like healthcare, construction, and transportation added jobs, while hiring in manufacturing, retail, and leisure stagnated.
The Federal Reserve’s policy decisions are closely watched amid ongoing debates about the state of the US economy. Critics argue that the Fed’s decision to hold rates steady may have been a misstep, suggesting the central bank is falling behind in its response to economic conditions. Senator Elizabeth Warren criticized the Fed for not cutting rates sooner, warning of potential economic risks if corrective measures are delayed.
The labor market report for July also reflects broader concerns about economic performance, with a global stock sell-off intensifying on fears of a US economic slowdown. Data showed that job openings have decreased from a peak of over 12 million in 2022 to about 8 million in June, with some companies beginning to reduce job vacancies rather than making layoffs.
Overall, the US economy’s cooling labor market and rising unemployment rate heightened uncertainty and adjusting expectations for future Federal Reserve actions.
