The US economy added fewer jobs than expected in July, but solid wage gains and a decline in unemployment rate back to 3.5 per cent pointed to continued tightness in labour market conditions. 

The Labor Department’s employment report on Friday also showed that job growth in May and June was revised lower, potentially suggesting that demand for labour was slowing in the wake of the Federal Reserve’s hefty interest rate hikes. But with 1.6 job openings for every unemployed person in June, the moderation in hiring may be the result of companies failing to find workers. 

The mixed report did not change growing perceptions among economists that the Fed could engineer a “soft landing” for the economy, though much would depend on the direction of inflation after annual increases in prices slowed sharply in June. 

“This report contains many signs that we’re on the path to a ‘soft landing’. However, that path can also lead us to a sustained downturn, if we miss the exit to a sustainable and strong labour market,” said Nick Bunker, the head of economic research at Indeed Hiring Lab. “We haven’t approached that fork in the road yet, but there is still a strong possibility that the labour market can rebalance without a recession,” he added. 

Non-farm payrolls increased by 187,000 jobs last month, the Labor Department’s survey of households showed. Data for June was revised lower to show 185,000 jobs added instead of the previously reported 209,000. The job growth in June was the weakest since December 2020. The economy created 49,000 fewer jobs in May and June than previously reported.  

The economy needs to create roughly 100,000 jobs per month to keep up with growth in the working-age population.