Weak July hiring shifted rate expectations and lifted markets

The U.S. economy added about 23,000 jobs in July, well below forecasts of about 83,000, after June hiring was revised down to 20,000. May’s job gains were also revised lower, to 129,000 from an initial 172,000.

The unemployment rate fell to 4.1% as the labor force participation rate slipped to 61.4%. Private employers added 30,000 jobs, with construction up 22,000, while leisure and hospitality cut 40,000 jobs and retail lost 19,000. Government employment fell by 53,000, mostly in local education.

Wage growth also cooled, with average hourly earnings up 4 cents and the 12-month rate easing to 3.2%. Markets rallied Friday as the weak jobs data reduced expectations for a September rate hike, while bond prices rose and yields fell.

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