July adds 73,000 jobs to the economy, major downward revisions for May and June’s numbers: CEI analysis

The economy added a modest 73,000 jobs in July, with major downward revisions for May and June triggering alarms about the state of the labor market. The economic uncertainty surrounding the administration’s trade policies has caused businesses to pump the brakes in hiring new workers.

CEI Senior Economist Ryan Young:

“The economy has been at roughly full employment for several years now. It is unreasonable to expect rapid jobs growth, because there isn’t room for it. But it is reasonable to expect job growth to keep up with population growth. That is not happening.

“While the upward tick from 4.1 percent to 4.2 percent unemployment is no big deal, the labor force participation rate’s decline is cause for concern. It has declined by half a percentage point this year, equivalent to more than half a million people dropping out of the labor force.

“Another concern is long-term unemployment, which is growing faster than jobs are. This number increased by 10 percent in July alone, up to a total of 1.8 million people.

“Combine these problems with substantial downward revisions of May and June’s data, and cracks are showing in the labor market. It has a lot of room to fall, but tariffs and continuing policy uncertainty are not encouraging businesses to make long-term investments in either capital or labor.”

CEI Research Fellow Sean Higgins:

“The Labor Department’s report Friday that only 73,000 jobs were gained in July, below forecasts, combined with the revisions for May and June eliminating 258,000 in previous job gains, show that the economy has not been shouldering the trade-related shocks of this year as well as previously thought.

“Part of the losses can be attributed to the administration’s efforts to trim the federal workforce. However, losses in that area only total 84,000 so far this year. Resistance to the administration’s downsizing has had the ironic effect of boosting the jobs numbers higher than they would otherwise be.

“The administration’s trade policy has created so much uncertainty that businesses have held back on hiring and investments. The weakened jobs numbers have followed. Until and unless the policies settle, expect the jobs numbers to suffer accordingly.”