Ice cubes with drops of melt water water on a blue background, top view. Freshness in the sultry heat. Cooling drinks

Key takeaways

  • The U.S. economy added 187,000 jobs in July 2023, showing a sustained slowdown from the average monthly gains of 312,000 reported over the prior 12 months.
  • Downward revisions to May and June employment data also revealed a combined 49,000 fewer jobs added in those months compared with previous reports.
  • The unemployment rate inched down to 3.5% in July from 3.6% in June, while the labor force participation rate and employment-population ratio remained largely unchanged during the month.
  • Average hourly earnings jumped 14 cents, or 0.4%, in July. Persistent wage growth complicates the story of cooling inflation supported by the headline jobs numbers, raising questions about the Federal Reserve’s path forward on interest rates.

Overview of the July 2023 jobs report

In its latest release of data on the U.S. jobs market, the Bureau of Labor Statistics (BLS) reported that non-farm payroll employment increased by 187,000 in July 2023. This represents a significant cooldown from the pace of hiring over the preceding 12 months, which saw average monthly gains of 312,000 jobs.1

In addition to the more subdued rate of jobs growth in July, the BLS downwardly revised its non-farm payroll numbers from May and June by a combined 49,000 jobs. These adjustments to the previous months’ data lend additional support to the notion of a continued cooldown in the labor market.2

The more subdued labor market growth suggests additional progress for the Federal Reserve’s campaign against inflation. After a brief pause, the central bank resumed its interest rate hikes at its July meeting.3 The diminishing pace of jobs growth in the latest BLS report suggests that the Fed is making progress against inflation even as the economy remains resilient against the tightening measures.

However, persistent wage growth complicates the inflation picture and raises questions about the path forward for the Fed. Average hourly earnings for all non-farm employees jumped 14 cents, or 0.4%, in July. Including this uptick, wages have increased 4.4% over the past 12 months.4 Sarah Stillpass, Global Investment Strategist at J.P. Morgan, noted, “The uptick in average hourly earnings may be somewhat disappointing from the Fed's perspective, given their hope of seeing wage gains moderate in order to further curb services inflation.” The persistent growth in wages suggests that the Fed may have more work to do.

In another potential signal of labor market resilience, the unemployment rate inched downward to 3.5% in July 2023 from 3.6% in June. The labor force participation rate remained at 62.6%, a level that has held steady for five straight months. The employment-population ratio also remained stable in July, posting only minimal changes.5

Health care was one area that saw strong gains in July, with the addition of 63,000 jobs outshining the industry’s monthly average gains of 51,000 over the preceding 12 months. Other areas of strength included social assistance and financial activities, which posted July job additions of 24,000 and 19,000, respectively.6

Meanwhile, employment growth in leisure and hospitality continued to slow down in July. After posting average monthly gains of 67,000 positions in the first three months of 2023, growth in leisure and hospitality has been more subdued in recent months. The sector added just 17,000 jobs in July, and employment in leisure and hospitality remains 2.1% below the pre-pandemic level reported in February 2020.7

Employment outlook

The headline number of 187,000 non-farm payroll positions added in July 2023 indicates that the U.S. labor market continues to cool from the heated pace of growth experienced during the height of the recovery from the pandemic. The downward revisions to the numbers from May and June provide additional evidence of a hiring slowdown. Stillpass emphasized the importance of keeping in mind that, “There is an element of seasonality in the jobs numbers – especially in the summer.” She added, “We would not be surprised to see August’s report continue along this trendline as a result.”

Despite increasing indications of a slower pace of jobs growth, U.S. employers are continuing to hire additional workers, and unemployment continues to tick lower. Persistent wage growth also signals resilience in the labor market.

Portfolio implications

Of course, developments in the labor market can affect your ability to find or keep a job, but the impact of the jobs report also extends to your investment portfolio. The effect on investors primarily hinges on how the Federal Reserve interprets and reacts to the latest jobs data.

July’s continued hiring slowdown should come as welcome news to investors hoping that the Fed is nearing the end of its hiking cycle and that interest rates will soon begin to abate. However, signs of resilience – particularly the average hourly earnings – suggest that the markets may not be completely out of the woods in terms of inflation.



Bureau of Labor Statistics, “The Employment Situation — July 2023.” (August 2023).













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