The Department of Labor Statistics reported the US economy lost 23,000 jobs in July, while the unemployment rate ticked down slightly to 4.1 percent. Economists expected a gain of 89,000 jobs. The shortfall renews concerns about the underlying strength of the labor market, added to Fed’s ongoing concern about inflation.
The labor data from May and June were revised down in this report, with 103,000 new jobs being overstated during those two months. The decline in the unemployment rate is a result of people leaving the labor force. Job losses have been attributed to a reduction in government jobs, as well as in the leisure and hospitality sector, and in retail.
An uncertain labor market has slightly lowered expectations for a September rate increase. The Fed’s main concern remains elevated inflation, which could still justify the raising of rates. There will be a series of key data releases in the next five weeks, which will include August job market numbers and inflation for both July and August, all of which will be factored into the decision making process.