U.S. Shed Jobs in July, Lowering Expectations of a Fed Rate Hike

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Alex Ossola (0:32)

A US lost 23,000 jobs last month, a surprise to economists and a sign that maybe the economy isn't as strong as it seems. Plus, an appeals court says construction must stop on President Trump's White House ballroom project.

And in the weeks since New York City's new Pieta tear tax went into effect, wealthy residents are finding ways to push back or get around it.

Rebecca Picciotto (0:54)

So far, a lot of these lawyers and financial advisors are kind of in a position of putting it lightly to their clients. Most of these strategies are not going to get them off the hook.

Alex Ossola (1:03)

It's Friday, August 7th. I'm Alex Ossola for the Wall Street Journal. This is the PM Edition of What's News, the top headlines and business stories that move the world today.

The US labor market unexpectedly shed jobs last month. The Labor Department's latest jobs report shows that it lost 23,000 jobs, a big shortfall versus the gain of 83,000 that economists had expected. For more, I'm joined out by WSJ economics reporter Matt Grossman. Matt, a surprise loss here. Where in the labor market did we see these losses?

Matt Grossman (1:36)

The government sector was one of the weaker areas in July.

The economy lost jobs in leisure and hospitality. There were small gains in manufacturing, but only pretty small. And retailers also shed jobs. There was decent hiring in the construction sector that has been boosted over the past few months by the incredible surge of investment in AI infrastructure. There was moderate hiring in private sector, healthcare jobs, hospital workers, home healthcare aides. But that's been such a strong source of job growth over the past year that even a moderate reading there is a bit of a slowdown from some of the momentum we'd seen in past months.

Alex Ossola (2:22)

We also saw this downward revision for the May and June numbers. The labor market had seemed to be on an upswing for the past few months, but is that in doubt now?

Matt Grossman (2:32)

It definitely casts the past few months in a new light. Coming into this report, we'd had a few fairly strong months. The downward revisions we got today cast a lot more doubt on that story. It's a lot harder to make the case that we're seeing an upswing in a big surge of new hiring momentum.

So compared with where we thought we were, it looks more likely that at best we're sort of moving sideways in this kind of stable, moderate hiring and perhaps at risk of a further slowdown.

Alex Ossola (3:09)

So of course, Matt, my question now is going to be what this means for the Fed. I mean, we're still in this period where inflation is a concern. Some officials had already been considering a rate hike at the meeting next month. What does this mean for them?

Matt Grossman (3:22)

Inflation has been a problem for the Fed for now five years. And a lot of officials are losing patience with that. They're saying that price increases have been above our target for so long that we need to take action and raise rates. And that was the top of the agenda for the September meeting.

That probably doesn't change with this report. But if you're a Fed official who has had some concerns about raising rates or isn't sure that it's necessary, a weaker looking labor market might add to your doubt. So I think for now that debate is still very much in play. There's still a lot of data to come before the September meeting. We have one more jobs report and two more months of inflation data. So today might temper expectations of a rate hike a little bit, but when the Fed actually meets in mid September, they're going to have a lot more information than we do today so far.

Alex Ossola (4:20)

That was WSJ Economics reporter Matt Grossman. Thank you, Matt.

Matt Grossman (4:23)

Thank you.

Alex Ossola (4:24)

US indexes were up today as the jobs report made traders scale back their expectations for a rate hike at the Fed's next meeting. The NASDAQ led the gains closing up 1.3 percent, and the S&P 500 rose 0.6 percent to a new record. Treasury yields edged lower today and oil prices nudged higher.