US Unemployment Rises To 4.2 Per Cent As Labour Market Loses Momentum

<p>US employment growth slowed sharply in July, with fresh government data revealing the labour market is far weaker than previously thought. Nonfarm payrolls increased by just 73,000 last month, well below forecasts, while figures for May and June were revised lower by a hefty 258,000 jobs, the largest such revision in years.</p>
<p>The Bureau of Labour Statistics (BLS) said the adjustments stemmed from new data from businesses and agencies, calling them &ldquo;larger than normal&rdquo;, reported Reuters.</p>
<p>The unemployment rate climbed to 4.2 per cent as household employment dropped. Analysts said the dismal report increases the likelihood of the Federal Reserve cutting interest rates in September. &ldquo;The door to a Fed rate cut in September just got opened a crack wider,&rdquo; said Christopher Rupkey, chief economist at FWDBONDS. &ldquo;The labour market is not rolling over, but it is badly wounded and may yet bring about a reversal in the US economy’s fortunes.&rdquo;</p>
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<h2><strong>Tariffs, immigration raids weigh on economy</strong></h2>
<p>President Donald Trump&rsquo;s trade and immigration policies are increasingly seen as straining the economy. His latest round of tariffs, including a 35 per cent duty on Canadian goods, has stoked inflation concerns and raised fears of stagflation &ndash; a mix of weak growth and high prices. Stocks fell and Treasury yields slipped after the report.</p>
<p>Job creation in July was driven largely by healthcare and social assistance, which added 73,300 jobs. Retail roles rose by 15,700, and financial activities gained 15,000. However, manufacturing, professional services and wholesale trade all lost jobs. Federal government employment dropped by another 12,000 positions and is down 84,000 since January, with further losses expected after the Supreme Court backed mass firings aimed at cutting costs.</p>
<p>Immigration crackdowns and a wave of baby boomer retirements have reduced the labour supply, pushing participation down for the third month in a row to 62.2 per cent. About 38,000 people left the labour force in July, while household employment fell by 260,000. Economists warned that the tighter labour pool and policy uncertainty could keep wage growth elevated at 3.9 per cent even as overall job creation slows.</p>
<p>&ldquo;Stagflation is the best description of the domestic economy as we enter the second half of the year,&rdquo; said Joseph Brusuelas, chief economist at RSM US.</p>