U.S. job growth cools as hiring sentiment weakens

U.S. employers added 140,000 jobs in July, undershooting economists’ expectations and signaling a cooling labor market, data from the Bureau of Labor Statistics showed on Tuesday.

The unemployment rate held steady at 4.1%, while average hourly earnings rose 0.2% month-over-month, a modest increase that suggests subdued wage pressure. The figures follow a downward revision of June’s nonfarm payrolls to 160,000 from 206,000, reinforcing concerns over a slowdown in hiring activity.

Industry breakdowns revealed weakness in manufacturing and retail, where payrolls declined, while health care and government sectors continued to expand. The labor force participation rate edged up to 62.6%, indicating a slight increase in workers re-entering the job market.

Analysts attributed the softer hiring trend to elevated economic uncertainty, rising labor costs, and growing caution among businesses amid shifting demand conditions. The Federal Reserve’s recent policy signals, including expectations of a potential rate cut in September, have also contributed to a more measured approach to workforce expansion.

The mixed labor market data adds to broader economic concerns, with investors monitoring its implications for consumer spending and inflation dynamics. The report follows recent declines in job openings and a slowdown in wage growth, trends that have raised questions about the sustainability of the post-pandemic labor recovery.

For the year to date, nonfarm payrolls have averaged 165,000 per month, down from 250,000 in 2023, reflecting a broader deceleration in job creation.