WASHINGTON: US private job growth slowed sharply in July, pointing to a loss of momentum in the economy heading into the third quarter that could temper expectations of a September interest rate hike.
Other economic data yesterday showed a widening of the trade deficit in June as solid domestic demand in the second quarter and a strong dollar sucked in imports of food and automobiles.
“Job growth is strong, but it has moderated since the beginning of the year. Nonetheless, even at this slower pace of growth, the labor market is fast approaching full employment,” said Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pennsylvania.
Private employers hired 185,000 workers last month, the ADP National Employment Report showed, well below economists’ expectations for an increase of 215,000. June’s private payroll gains were revised down to 229,000 from the previously reported 237,000.
The report, which is jointly developed with Moody’s Analytics, came ahead of the US government’s more comprehensive employment report tomorrow. According to a Reuters survey of economists, nonfarm payrolls likely increased 223,000 last month, matching June’s job gains.
Signs of a moderation in hiring and some stalling in wage growth could cast doubts on expectations that the Federal Reserve will raise rates in September. The US central bank has kept its short-term interest rate near zero since December 2008.
In a separate report, the Commerce Department said the trade deficit increased 7.1 percent to $43.8bn, which also reflected a second straight monthly drop in exports. May’s trade gap was revised to $40.9bn from the previously reported $41.9bn.
Economists had forecast the trade deficit rising to $42.8bn. When adjusted for inflation, the deficit increased to $59.3bn in June from $57.6bn in the prior month.
The trade data likely will have a marginal impact on the second-quarter gross domestic product estimate released last week, as the deficit on the goods balance came in broadly in line with the advance figure incorporated in the GDP report.
In that report, the government estimated the economy expanded at a 2.3 percent annual pace, with trade adding 0.13 percentage point to GDP. But following stronger-than-forecast construction and factory inventory data, economists expected GDP would be revised to as high as a 3 percent annual rate when the government publishes its second GDP estimate later this month.
Domestic demand grew solidly in the second quarter. The dollar, which has gained 15 percent against the currencies of the United States’ main trading partners since June 2014, is also making imports cheaper.
In June, imports increased 1.2 percent to $232.4bn. Despite firming domestic demand, some of the imports likely ended up in inventories, which remained at very high levels in the second quarter.
Imports of food and automobiles were the highest on record in June. Dollar strength and sluggish global demand crimped exports, which slipped 0.1 percent to $188.6bn in June. Exports to the European Union fell 2.3 percent, while imports surged 4.0 percent to a record high. That left the trade deficit with the EU at an all-time high.
Reuters
