US labor market cracks widen as job growth hits stall speed
The Labor Department's closely watched employment report on Friday also showed the unemployment rate rose to 4.2% last month as household employment declined. Labor market resilience has shored up the economy amid headwinds from President Donald Trump's aggressive trade and immigration policies.
Import duties are starting to boost inflation, raising the risk that the economy could experience a period of tepid growth and high prices, known as stagflation, which would put the U.S. central bank in a difficult position. Domestic demand increased at its slowest pace in 2-1/2 years in the second quarter.
"The president's unorthodox economic agenda and policies may be starting to make a dent in the labor market," said Christopher Rupkey, chief economist at FWDBONDS. "The door to a Fed rate cut in September just got opened a crack wider. The labor market is not rolling over, but it is badly wounded and may yet bring about a reversal in the U.S. economy's fortunes."
Nonfarm payrolls increased by 73,000 jobs last month after rising by a downwardly revised 14,000 in June, the fewest in nearly five years, the Labor Department's Bureau of Labor Statistics said. Economists polled by Reuters had forecast payrolls would increase by 110,000 jobs after rising by a previously reported 147,000 in June. Estimates ranged from no jobs added to an increase of 176,000 positions.
Payrolls for May were slashed by 125,000 to only a gain of 19,000 jobs. The BLS described the revisions to May and June payrolls data as "larger than normal."
It gave no reason for the revised data but noted that "monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors."
Economists have raised concerns about data quality in the wake of the Trump administration's mass firings of federal workers.
Employment gains averaged 35,000 jobs per month over the last three months compared to 123,000 a year ago. Uncertainty over where tariff levels will eventually settle has made it harder for businesses to plan long-term, economists said.
Though more clarity has emerged as the White House announced trade deals, economists said the effective tariff rate was still the highest since the 1930s. Trump on Thursday slapped dozens of trading partners with steep tariffs, including a 35% duty on many goods from Canada.
Trump, who has demanded the U.S. central bank lower borrowing costs, stepped up his insults aimed at Fed Chair Jerome Powell, posting on the Truth Social media platform, "Too Little, Too Late. Jerome "Too Late" Powell is a disaster."
The Fed on Wednesday left its benchmark interest rate in the 4.25%-4.50% range. Powell's comments after the decision undercut confidence the central bank would resume its policy easing in September as had been widely anticipated by financial markets and some economists.
Powell is focused on the unemployment rate. Financial markets now expect the Fed to resume its monetary policy easing next month after pushing back rate-cut expectations to October in the wake of Wednesday's policy decision.
The case for a September rate cut could be reinforced by the BLS' preliminary payrolls benchmark revision next month, which is expected to project a steep drop in the employment level from April 2024 through March of this year.
The Quarterly Census of Employment and Wages data, derived from reports by employers to the state unemployment insurance programs, has indicated a much slower pace of job growth between April 2024 and December 2024 than payrolls have suggested.
Stocks on Wall Street were trading lower on the data and latest round of tariffs. The dollar fell against a basket of currencies. U.S. Treasury yields dropped.
Job gains in July continued to be concentrated in the healthcare and social assistance sector, which added a combined 73,300 jobs. Retail employment increased by 15,700 jobs and financial activities payrolls rose by 15,000.
There were small job gains in the construction and leisure and hospitality industries, which economists attributed to ongoing immigration raids. Several industries, including manufacturing, professional services and wholesale trade shed jobs.
The share of industries reporting job growth, however, rose to 51.2% from 47.2% in June. Federal government employment dropped by another 12,000 positions and is down 84,000 since peaking in January. More job losses are likely after the Supreme Court gave the White House the green light for mass firings as Trump seeks to slash spending and headcount. But the administration has also said several agencies were not planning to proceed with layoffs.
The unemployment rate increased to 4.248% before rounding last month. It declined to 4.1% in June also as people dropped out of the labor force, and remains in the narrow 4.0%-4.2% range that has prevailed since May 2024.
The government's immigration crackdown has reduced labor supply, as has an acceleration of baby boomer retirements. Economists estimated the economy now needs to create less than 100,000 jobs per month to keep up with growth in the working-age population.
About 38,000 people left the labor force, which was offset by a drop of 260,000 in household employment. The labor force participation rate fell to 62.2% from 62.3% in June, now down for three straight months and capping the rise in the jobless rate.
"Without the participation rate decline, the unemployment rate would have added another tenth to a solid 4.3%," said Michael Gapen, chief U.S. economist at Morgan Stanley. "Immigration restrictions have and will continue to have a chilling effect on participation and will continue to add to downward pressure on the unemployment rate."
The number of foreign-born workers fell by 341,000. Economists said this decline along with the drop in the labor force kept annual wage growth at a lofty 3.9%. There were more part-time workers and a jump in the number of people experiencing long bouts of unemployment. The median duration of unemployment increased to 10.2 weeks from 10.1 weeks in June.
"One gets the sense that due to trade and immigration policy the domestic economy and labor market are paying a price," said Joseph Brusuelas, chief economist at RSM US. "Stagflation is the best description of the domestic economy as we enter the second half of the year."
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Telegraph
30 minutes ago
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Murdoch takes on Trump in press baron's last stand
When Rupert Murdoch stepped down as executive chairman of both News Corp and Fox just under two years ago, it was seen as a cautious first step into retirement for the nonagenarian media tycoon. Although still ultimately in charge of his empire, Murdoch has handed day-to-day responsibility over to his son Lachlan. Meanwhile, he has focused his attention on succession planning, including a bitter legal battle with his own children over the family trust. But any suggestion that Murdoch might slide into a quiet dotage now appears premature. Donald Trump's $10bn (£7.5bn) defamation lawsuit against Dow Jones, which publishes the Wall Street Journal (WSJ), is aimed squarely at Murdoch himself. The legal challenge is the latest salvo in Trump's increasingly aggressive assault on the media. It also sets up what will likely be a final battle for the world's best-known newspaper tycoon – and one that could define his legacy. As one of his former executives puts it: 'The American president has taken on Rupert Murdoch, an extraordinary media force for the last 50 years ... It's a box office story.' Trump's lawsuit relates to a WSJ story alleging that Trump sent the late paedophile Jeffrey Epstein a 'bawdy' birthday card complete with a drawing of a naked woman. Trump, who called the Journal's editor Emma Tucker from Air Force One in an effort to shut down the story, has branded it 'fake' and is seeking $10bn in damages. Trump has sniped at Murdoch, insisting the tycoon wants to settle. In a further provocation, lawyers for Trump last week filed a motion demanding an expedited deposition of Murdoch, citing the fact that the mogul is 94 and 'has suffered from multiple health issues throughout his life'. The scale of these alleged health issues was laid bare in a 2023 Vanity Fair article. It revealed Murdoch had been taken to hospital with a severe case of Covid-19, alongside several other incidents. 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Stephen Colbert branded the settlement a 'big fat bribe' and was axed from the network shortly afterwards. By contrast, though, many believe Murdoch will not roll over and that the WSJ will stand by its reporting. '[Trump] assumes someone will settle and pay him an improbable amount of money, and I suspect that's not Murdoch,' says Stephens. The former executive adds: 'So many people think that Murdoch is the suppressor of a free press. Here you've got a very good example of the fourth estate standing up to the American president.' The source also points to the fact that two key figures – Robert Thomson, the Australian News Corp boss, and Emma Tucker, the British editor of the Journal – may be more willing to stand up to the US head of state than their American colleagues. Another senior figure who previously worked at News Corp agrees that Murdoch will 'close ranks' in defence. 'When you work there you're constantly under attack internally, except when something like this happens,' the executive says. 'They tend to fight hard amongst themselves in normal times, but when there's a crisis they say, 'We're backing you 100 per cent.'' Murdoch's support is not always longstanding, however. James Harding, the former Times editor who now runs The Observer, was quietly pushed out in late 2012 – reportedly after the tycoon baulked at his support for Obama in the presidential election. Could Tucker face a similar fate? It is far from the first time that Murdoch – a key inspiration for Logan Roy, the ruthless media patriarch in HBO hit Succession – has courted controversy or gone into battle against powerful foes. His reputation was cemented during the Wapping dispute, a year-long stand-off with print workers in 1986 in which the tycoon eventually broke the powerful unions. Perhaps most notorious, however, were revelations that journalists at the News of the World had eavesdropped on private messages. While Murdoch has always insisted that he did not know phone hacking was going on at his publication, he was forced to shutter the tabloid and his UK publishing empire has paid out more than £1bn in compensation and other related costs to victims. In the Murdoch empire, even family members are not off-limits in pursuit of victory in business. The patriarch last year clashed with three of his children – Prudence, Elisabeth and James – over his attempt to change the family trust to hand over complete control to Lachlan. Following a high-profile legal battle that drew comparisons to Succession, Murdoch was ultimately defeated, setting the scene for an almighty tussle over his legacy. 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In his latest legal battle, it is not Chinese authorities that Murdoch must be sensitive to, but his own Trump-supporting audiences. In a sign that Murdoch is looking to expand his influence in new areas, News Corp this week unveiled plans to open a new outpost of the New York Post based in Los Angeles. Robert Thomson, the News Corp boss, vowed the new title, dubbed The California Post, would be an 'antidote to the jaundiced, jaded journalism that has sadly proliferated'. Playing both sides While Dow Jones has said it will 'vigorously defend' against any lawsuit, both Fox and the New York Post have remained silent on the issue, suggesting Murdoch may be trying to play both sides. DeGroote says: 'Would it be in his commercial interest to wreck the relationship between his own viewers, his own readers and his titles by being seen to pursue an anti-Trump agenda?' The WSJ is by no means a struggling newspaper business. 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Reuters
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