Employment data dips: is US growth moderating?

Keith Wade

Keith Wade

Chief Economist & Strategist

See all articles

The US added 157,000 jobs in July, slightly weaker than expected compared to a market consensus of 190,000. However, upward revisions to May and June added nearly 60,000 to the total, such that the three-month trend in payrolls remains robust at 224,000 per month.

Cutbacks in government meant that private payroll growth outpaced the headline with professional and business services, leisure and hospitality, and manufacturing being the leading sectors for job creation.

The unemployment rate dropped from 4% to 3.9% whilst average hourly earnings gained 0.3%, although this left the annual rate at 2.7% year-on-year due to downward revisions.

Weaker start to Q3?

Monthly employment figures are volatile and the weakness in July could be followed by a bounce-back in August, replicating the pattern seen earlier in the year.

However, whilst it is difficult to draw strong conclusions from one month’s figures, the dip in payrolls did contribute to a decline in total hours worked last month, which suggests that the US economy did not get off to a strong start in the third quarter.

Either that, or, faced with skill shortages, firms are raising worker productivity, although if this were the case we would probably see stronger wage growth. 

US growth is moderating

We raise the question of a dip in growth as this report follows the ISM manufacturing and non-manufacturing surveys, which were both softer than expected, and a downward revision to the PMI index. Both surveys are at high levels, but reinforce the point that growth is moderating in the US.

Trade figures released today also showed a dip in exports and a pick-up in imports in June, indicating that the trade sector’s robust contribution to activity in Q2 was waning by the end of the quarter. With tariffs being applied in July between the US and China, these figures will be closely watched for signs of export weakness.

Today’s job figures do not alter our view that the world economy is entering a soft patch.

Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change.  To the extent that you are in North America, this content is issued by Schroder Investment Management North America Inc., an indirect wholly owned subsidiary of Schroders plc and SEC registered adviser providing asset management products and services to clients in the US and Canada. For all other users, this content is issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.