T
he July employment report suggests the labor market has been weakening for some time, potentially prompting the Federal Reserve to cut interest rates in September if inflation eases. Key points include:
* The US added 73,000 jobs in July, but the Bureau of Labor Statistics revised downward May and June numbers significantly.
* President Donald Trump fired the head of the BLS after making unsupported claims about political bias.
* Mortgage rates fell slightly on the news, but it's unclear how the Fed will weigh employment and inflation concerns when meeting next month.
The US economy added 73,000 jobs in July, with the unemployment rate rising to 4.2%. However, significant downward revisions for May and June indicate the labor market was weakening earlier than expected. New hirings were concentrated in healthcare, while manufacturing lost 11,000 jobs and construction added only 2,000.
President Trump fired Erika McEntarfer, the BLS commissioner, without evidence of political bias. The jobs report led to a decline in mortgage rates, with the 30-year rate falling to 6.63% from 6.75%. Further modest declines in mortgage rates are possible due to slower hiring and weaker numbers.
The Federal Reserve may now have to choose between maintaining current interest rates or lowering them to bolster the economy and job market. Even if they cut short-term interest rates, it could cause inflation to spike, potentially having the opposite effect on mortgage rates.
