Job Growth Decelerates Amid Federal Reserve's Interest Rate Discussions and Upcoming Election
The job market is cooling, with only 122,000 jobs added in July, as reported by ADP. Most new jobs were in trade, transportation, and unexpectedly, construction.
Annual wage growth was at its lowest in three years, increasing by 4.8%.
ADP's chief economist, Nela Richardson, noted that the slower wage growth aligns with the Federal Reserve's efforts to control inflation, suggesting that labour is not currently driving inflation higher.
Recent data, including a slight decline in job openings, indicates a slowdown in the labour market.
The government is expected to report around 175,000 new jobs for July, down from 206,000 in May.
Natixis economist Jonathan Pingle predicts 165,000 new nonfarm payrolls, noting the forecast's uncertainty due to factors like Hurricane Beryl and seasonal adjustments in the education sector.
The Federal Reserve is expected to hold interest rates steady but may hint at a rate cut in September, possibly to avoid appearing politically motivated before the November presidential election.
Former President Donald Trump previously criticised Fed Chairman Jerome Powell, but has recently been more supportive.
President Joe Biden and Vice President Kamala Harris have largely refrained from commenting on the Fed.
LPL Financial Chief Economist Jeffrey Roach suggests that if the labour market continues to weaken, consumer spending, particularly on discretionary items, may also decline.
Investors are advised to anticipate a potential rate cut announcement at the Fed's September meeting.
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