Unexpected job losses in US last month
The US economy unexpectedly shed jobs in July and nonfarm payrolls for the previous month were revised sharply lower, potentially raising questions about whether the Federal Reserve will increase interest rates next month.
The US economy unexpectedly shed 23,000 jobs in July, despite an earlier upward revision of 20,000 jobs in June, according to the Labor Department's employment report. This unexpected downturn raises questions about the Federal Reserve's decision to raise interest rates next month. Economists polled by Reuters had predicted a payroll increase of 80,000 jobs, following June's 57,000 increase.
Estimates varied from 10,000 to 140,000 jobs added. Payroll figures tend to be softer in July, with economists describing the labor market as being in a "slow hire, slow fire" mode. Despite the Middle East conflict entering its sixth month, the US economy managed to weather the storm, with domestic demand growing at its fastest pace in over three years during the second quarter.
The unemployment rate dropped to 4.1% from 4.2% in June, as the labor force participation rate declined further. Prior to the report, markets had anticipated a September interest rate hike from the Fed, which left its benchmark interest rate range at 3.5%-3.75% last week. Three committee members dissented, favoring a quarter-point hike.
Upcoming inflation data may further influence the debate on the Fed's near-term monetary policy outlook.
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