Job growth sputtered in July as many industries like manufacturing, retail and trade pulled back on hiring.
Employers added 114,000 jobs in July, the Labor Department said in its monthly payroll report released Friday, missing the 175,000 gain forecast by LSEG economists. The unemployment rate, meanwhile, inched higher to 4.3%, the highest level since October 2021.
"Yellow flags had started to pop up in the labor market data over the past few months, but now the flags are turning red," said Nick Bunker, economic resaerch director for North America at Indeed Hiring Lab. "The rise in the unemployment rate cannot be ignored as job gains have weakened and become less common."
The health care sector accounted for the biggest payroll gains in July, adding 55,000 jobs. Employment continued to trend upward in home health care services (21,600), hospitals (19,500) and nursing and residential care facilities (9,200).
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There were also modest gains within the construction sector last month, with payrolls growing by 25,000. The bulk of those jobs took place within specialty trade contractors (18,700).
Hiring in the leisure and hospitality sector was the third-biggest contributor to the headline job gain last month. The industry onboarded 23,000 employees in July. Nearly all the gains – about 19,500 – took place at bars and restaurants. Hotels hired more than 6,000 workers in July.
However, hiring beyond those sectors was lackluster,
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"The payroll survey at least shows employment growing, but the gains are clearly slowing down," Bunker said. "Job gains are also becoming thinner as the diffusion index came in below 50 in July, an indicator that less than half of industries added jobs over the month. Health care and social assistance may still be adding a fair number of jobs, but one sector can’t sustain an expansion by themselves."
Other gains last month included hiring within the government (17,000), transportation and warehousing (14,000) and social assistance (9,000).
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A handful of sectors of the economy saw hiring decline last month.
Employment within the information industry tumbled by 20,000, while financial activities lost 4,000 jobs. Mining and logging, as well as professional and business services, each lost 1,000 jobs.
