US economy loses 23,000 jobs in July despite expectations of growth: What went wrong

The United States (U.S.) economy experienced an unexpected loss of jobs during the month of July which has raised new questions regarding how strong the U.S. Labour Market is and whether or not the economic policies put forth by President Donald Trump are working effectively.

According to the most recent jobs report there were 23,000 fewer jobs in the U.S. during the month of July compared to what economists expected (85,000). This was the first decrease in total U.S. Employment since February.

In addition to the job loss, the Department of Labour revised the number of jobs added in previous months, indicating that the Labour Market may not have been as strong as it was previously estimated.

Despite the job loss, the Unemployment Rate decreased from 4.2% to 4.1% however this is questionable because it coincided with a drop in individuals who are part of the Labour Force (61.4%) which is the lowest rate in almost five and a half years.

One of the sectors that saw the greatest amount of job losses was Leisure & Hospitality; they lost approximately 40,000 jobs. Education jobs in local government also saw large declines and although Healthcare, Construction and many other industries saw increases in employment.

Average Hourly Wages continued to rise but slower than before, increasing at a rate of 3.2 percent above last year’s wage averages, decreasing below the prior month’s wage increase percentage, which further indicated that the Labour Market may begin to lose momentum.

As soon as the results of the jobs report were released, it began to negatively impact stock markets and positively impacted bond markets.

Investors had their expectations lowered that the Federal Reserve will continue to raise interest rates through September, therefore reducing Treasury Yields and causing Stock prices to go up due to hopes that the Federal Reserve can provide less stringent monetary policies going forward.

Economists are cautioning against using one month’s numbers to determine if the economy is heading into recession.

However, when you combine job losses, decreases in previously estimated employment and lower workforce participation, these numbers indicate a serious warning signal for the world’s largest economy.