US non-farm payroll growth slows in July, workweek shrinks

The US jobs market slowed last month and the length of the average workweek declined a bit, although wages grew more quickly than expected and the labour force participation rate ticked higher.

According to the Department of Labor, non-farm payrolls expanded by 164,000 in July after an increase of 193,000 in the month before.

That was narrowly ahead of the 160,000 gain for July that economists had been anticipating.

However, payroll increases for the prior two months were revised down by a combined 41,000.

The year-on-year rate of increase in average hourly earnings meanwhile rose from 3.1% in June to 3.2% for July, but the length of the average workweek shrank from 34.4 hours in June to 34.3 for July.

Unemployment meanwhile held steady at 3.7%, even as the labour force participation rate rose from 62.9% to 63.0% or by 370,000 to 163.351m.

Within the private sector, hiring was strongest in services, where companies took an another 133,000 workers, while in goods industries employment increased by 15,000, despite the loss of 5,000 positions in Mining and Logging.

Education and Health services posted the biggest increases in services payrolls, registering increases of 66,000 and 38,000, respectively, while Retail continued to bleed workers, at a pace of -3,600.

Commenting on the data, Ian Shepherdson, chief economist at Pantheon Macroeconomics, highlighted the unexpectedly strong 0.3% month-on-month increase in average hourly earnings, which were it not for various calendar issues might have printed at up by 0.4% or 0.5%.

Nonetheless, the three-month moving average for payrolls growth fell to a "barely respectable" 140,000, Shepherdson said.

"Leading indicators point to gains averaging about 175K in August and September, but all bets are then off if the administration follows through its threat to impose 10% tariffs on the $300B or so of Chinese imports currently not tariffed," he added.

"The economy does not need lower rates if the threatened tariffs ultimately are not imposed, but if they happen, just in time to crimp hiring ahead of the holidays in the expectation that higher prices will hit spending, then the Fed likely will act."

Economists at Barclays Research on the other hand appeared more sanguine, describing service sector employment to clients as "resilient" and saying that factory sector employment was "holding up surprisingly well".